Oracle - Seibel Union Changes the CRM Game and Opens Door for Salesforce.com

You've got to give credit to Oracle CEO Larry Ellison. The guy's timing was exquisite.

He didn't wait for his own company's OpenWorld conference to start on Sept. 17 to announce Oracle's $5.85 billion acquisition of Siebel. Nope. Larry dropped the bomb just as Microsoft's Professional Developer's Conference was getting under way --- this week --- in Los Angeles. Adding insult to injury, as the PDC was starting up, Los Angeles was plunged into darkness as electrical workers apparently cut a wrong line. Perhaps they're on the Oracle payroll, too.

Though the timing of the Seibel announcement can be ascribed to Ellison's penchant for tweaking Bill Gates' nose, it's certainly not what solutions integrators have on their mind. The concerns --- not fear, but a healthy concern --- is what Oracle is trying to be and what it will mean for the future of customer relationship management. Good question.

Certainly, the Oracle of today (and tomorrow, pending regulatory and stockholder approvals of the Seibel acquisition) is very different from what it was just a couple of years ago. With its prior acquisitions of PeopleSoft (and JD Edwards, which PeopleSoft had previously acquired), Oblix, TimesTen, and some others, it's clear that Oracle wants to muscle SAP aside and become the leading supplier of business applications and services, most notably CRM.

Channel issues aside, one has to wonder what an Oracle-Seibel union means for the future of CRM applications.

The Seibel model has been one that followed the traditional path for applications. The customer buys (licenses, actually) a series of comprehensive, complex products that require often sweeping customization to integrate with existing systems. But that's changing.

Look no further than Salesforce.com. Started by 13-year Oracle veteran Marc Benioff, Salesforce.com is an on-demand CRM solution that replaces traditional enterprise software technology. It's a hosted subscription service. The customer installs nothing.

It must be working. The company continues to report growing profits and new customers. For 2006, it expects revenue to jump by up to 80 percent, reaching the $300 million plateau. And it now boasts more than 300,000 subscribers.

For a hosted environment that would seem to shut out any business opportunity for solutions integrators, Benioff seems to have an answer. At its own "Dreamforce" conference earlier this week, the company unveiled AppExchange, a platform where ISVs can market their own services-oriented applications.

In the meantime, we don't yet know how Oracle will assimilate Seibel. The union raises far more questions than it answers. How --- and whether --- SAP or Microsoft will tangibly respond (instead of merely hurling verbal insults) will take some time. For its part, SAP is not remaining quiet. Over the last several months, it has lured dozens of high-ranking movers and shakers away from BEA, Oracle, PeopleSoft, and Siebel. It has new products, too, including its own take on hosted CRM services.

It all means that CRM, which had been falling from grace, is making a strong comeback. According to a study by AMR Research, 2004 saw the CRM market grow by 10 percent, to $10.9 billion. Most important, revenue from hosted CRM skyrocketed 105 percent. It's the first time in five years that growth hit double digits.

It would be far too premature to suggest that traditionally licensed software is obsolete. Far from it. In fact, according to the AMR study, it still dominates. Clearly, however, change is in the air.