September 12, 2005 4:04 PM PDT

Bloggers react to Oracle's 'desperate' move

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A correction was made to this story. Read below for details.
News of Oracle's $5.8 billion buyout of software maker Siebel Systems had many bloggers asking what the deal will mean for the two companies and for customer relationship management software in general.

Some saw the acquisition as a no-brainer. In New West, a blog devoted to issues affecting the "Rocky Mountain West," Jonathan Weber wrote that, "Siebel had no future as an independent company because others have come along with software that is far, far cheaper and works much better for most applications. Once customers commit to something like Siebel, however, they are committed for a long time because it is so expensive to implement, and that's why it makes sense for Oracle to buy" the company.

But the overwhelming theme coming from the blogging community was that the acquisition was the desperate act of an ailing company that can no longer find growth organically and has to look elsewhere to expand.

The Trading Equities Investment Analytics Group, written by a self-proclaimed former Wall Street insider, said "investors must wonder how desperate Ellison is to generate earnings growth....As a means to improve its ROE (return on equity), Oracle wants to capture Siebel's assets as a means to further eliminate competition and add to its lackluster earnings. You know a company is desperate for business when they fail to deliver expected earnings growth and continue to acquire competitors."

Techdirt points out the same but questions whether Oracle is looking for growth in the right places.

"This does seem like a big admission from Oracle that its core business is slowing down and its apps business hasn't been very successful, so they need to buy from outside to keep growing," the site read. "Obviously, the plan (as it was when they tried to build their own apps) is to have apps that push for more database sales, and by taking out many of the competitive apps, they hope that Oracle comes across as the only choice. However, to some extent, it seems like they're focusing on buying the big legacy apps, and still ignoring the growing threats from below that look to completely undercut their market."

Dave Berlind, of ZDNet's Between the Lines blog, said it was interesting that large software companies find acquisition about the only way to increase revenues. "More interesting however," Berlind wrote, "is how the move positions Oracle CEO Larry Ellison as the king of all-things-CRM (customer relationship management). In addition to the way Oracle's databases provide the underpinnings for many if not most CRM installations today, Oracle not only has its own CRM offering, Larry Ellison is also a stakeholder in two of the most prominent rising CRM stars: Siebel arch-nemesis Salesforce.com and NetSuite...About the only CRM darling that Ellison doesn't have a stake in is the Bozeman, Mont.-based RightNow Technologies."

The conspicuousness of RightNow's position was not lost on Phil Wainewright, another ZDNet blogger. "Certainly, Microsoft and SAP's meager efforts now look puny in comparison, to the extent that SAP is probably already taking a serious look at acquiring on-demand CRM vendor RightNow Technologies, rather than relying on its upcoming launch of a homegrown offering to get in the game," he wrote.

Wainewright also looked at a few major obstacles Oracle will have to overcome to make the acquisition go smoothly. "The first practical problem will be extricating the Siebel CRM OnDemand infrastructure from hosting partner IBM's data centers. (You can just imagine Ellison's views on the desirability of running on WebSphere and DB2)." Wainewright goes on to cite the difficulty of merging the two code bases as well as predicting a rocky integration of culture. "Although Oracle has taken some strides in re-engineering its architecture for on demand, it hasn't done anything yet about its business model, which is still cast firmly in the SoSaaS (Same Old Software as a Service) mold."

Colin White of B-Eye pointed to potential problems for current customers. "As with PeopleSoft," he wrote, "Siebel's products support a number of underlying database products. If I was a Siebel customer I would be very nervous at present if the database product I was using is other than Oracle."

But, as has become par for the course, Salesforce.com's Marc Benioff has to take the prize for best commentary on the matter. In an e-mail to ZDNet's Berlind, the outspoken executive wrote "Even dinosaurs mate a few times before they die. It's the end of software. It's the end of Siebel."

 
Correction: This article incorrectly attributed comments from Techdirt to an online aggregation site.

 

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