Consolidation? What Consolidation?
Software industry insiders present their views on the long-anticipated Oracle-Siebel deal: what it means to product innovation, the CRM space, the health of the software industry - and whether it was a good deal in the first place.
By M.R. Rangaswami, Sand Hill Group
Sep. 16, 2005
Finally. The Oracle-Siebel deal is done and the industry can stop speculating about it. Interestingly however, the deal seems to have woken some observers from a deep sleep. Consolidation has been going on for years. The latest deals - specifically Oracle's aggressive buys - have simply made the trend front page news.
But broader awareness of big software mergers is important in and of itself. The sense that young companies cannot make a go of it alone any longer, that they must find a "Big Brother" to take them under their wing, dampens enthusiasm of many software executives and investors.
This is the wrong reaction. I would argue that innovation and opportunity continue to drive the software industry today - even in the face of these megadeals.
Innovation Continues to Power the Industry
Consolidation is most certainly accelerating. However there are major sectors which have yet to see any major mergers. Take middleware - or business intelligence. There are many small markets which continue to innovate and thrive.
Even in established software categories, innovation thrives. Look at Salesforce.com. NetSuite. These vendors operate in so-called mundane application areas but continue to grow rapidly and flourish at the same time consolidation is going on in their sector.
These upstarts and other vendors are succeeding by innovating - both product- and business model-wise - in areas where megavendors have weaknesses. Take MySQL and EnterpriseDB. Isn't the relational database market done and gone? Apparently not. Here are got two young companies leveraging open source and growing at 100 percent per year. It is obvious that using a new sales model - no salesforce - is enabling these little guys to pick a fight with the big guys in a part of the stack commonly thought of as "commoditized."
There does seem to be a "Software Big 5" emerging: SAP, Oracle, Microsoft, Symantec and EMC. These megavendors want to provide enterprise customers a soup-to-nuts array of solutions and simplify the CIO's vendor list.
But the perception that customers want to buy everything from a single vendor - however warranted - is idealistic. Once a single software vendor manages everything, the customer is beholden to that vendor. Smart CIOs know this - and are hedging their bets. They are balancing the right amount of business they give one vendor with the need to keep that vendor honest and serving them well. This fact ensures that small and mid-sized best-of-breed vendors will always have a place in the enterprise technology lineup.
A Variety of Perspectives
Yet few software mergers have caused the level of media and analyst frenzy that Oracle-Siebel has caused. Oracle was tentatively crowned the "King of CRM" despite the fact that Siebel was its "second choice" according to CEO Larry Ellison's deposition taken during the PeopleSoft acquisition. Interesting, considering Oracle paid top dollar for Siebel. Was it an offensive move? Or has Larry become the industry's new "scavenger?"
Indeed, the jury is out on the deal's winners and losers. Gartner says the deal points to the collapse of the middle class of software vendors. AMR Research feels the deal may push some fencesitting Siebel-users to SAP. Others speculate that RightNow Technologies will be the winner - as an independent or as a target for acquisition by SAP.
In fact, some say SAP's top spot in business applications is affirmed by the merger. The company has grown organically - more or less - and continues to be quite successful.
Peter Goldmacher of SG Cowen says the deal is great news for Salesforce.com. The deal leaves no other players in hosted CRM while at the same time, endorses the value of the segment. Others say the deal will be the end of Salesforce.com.
Guess which camp CEO Marc Benioff landed in as the Oracle-Siebel deal hit on Day One of the annual Salesforce.com user conference? In fact, in memos to their employees, both Benioff and CEO Greg Gianforte of RightNow were anything but downbeat about their companies' prospects in light of Siebel's purchase.
Of course, the deal exposes significant challenges for Oracle. One area is the danger of security gaps as its many products are integrated. And that's not to mention the very large gorilla in the corner: the incredible challenge of integration and customer support faced by Oracle. With six acquisitions in the past two years - 4,000 application customers with the Siebel deal alone - it will be difficult for Oracle to swallow its acquisitions and keep everyone smiling.
As Evil Knievel once said, ""Anybody can jump a motorcycle. The trouble begins when you try to land it."
But broader awareness of big software mergers is important in and of itself. The sense that young companies cannot make a go of it alone any longer, that they must find a "Big Brother" to take them under their wing, dampens enthusiasm of many software executives and investors.
This is the wrong reaction. I would argue that innovation and opportunity continue to drive the software industry today - even in the face of these megadeals.
Innovation Continues to Power the Industry
Consolidation is most certainly accelerating. However there are major sectors which have yet to see any major mergers. Take middleware - or business intelligence. There are many small markets which continue to innovate and thrive.
Even in established software categories, innovation thrives. Look at Salesforce.com. NetSuite. These vendors operate in so-called mundane application areas but continue to grow rapidly and flourish at the same time consolidation is going on in their sector.
These upstarts and other vendors are succeeding by innovating - both product- and business model-wise - in areas where megavendors have weaknesses. Take MySQL and EnterpriseDB. Isn't the relational database market done and gone? Apparently not. Here are got two young companies leveraging open source and growing at 100 percent per year. It is obvious that using a new sales model - no salesforce - is enabling these little guys to pick a fight with the big guys in a part of the stack commonly thought of as "commoditized."
There does seem to be a "Software Big 5" emerging: SAP, Oracle, Microsoft, Symantec and EMC. These megavendors want to provide enterprise customers a soup-to-nuts array of solutions and simplify the CIO's vendor list.
But the perception that customers want to buy everything from a single vendor - however warranted - is idealistic. Once a single software vendor manages everything, the customer is beholden to that vendor. Smart CIOs know this - and are hedging their bets. They are balancing the right amount of business they give one vendor with the need to keep that vendor honest and serving them well. This fact ensures that small and mid-sized best-of-breed vendors will always have a place in the enterprise technology lineup.
A Variety of Perspectives
Yet few software mergers have caused the level of media and analyst frenzy that Oracle-Siebel has caused. Oracle was tentatively crowned the "King of CRM" despite the fact that Siebel was its "second choice" according to CEO Larry Ellison's deposition taken during the PeopleSoft acquisition. Interesting, considering Oracle paid top dollar for Siebel. Was it an offensive move? Or has Larry become the industry's new "scavenger?"
Indeed, the jury is out on the deal's winners and losers. Gartner says the deal points to the collapse of the middle class of software vendors. AMR Research feels the deal may push some fencesitting Siebel-users to SAP. Others speculate that RightNow Technologies will be the winner - as an independent or as a target for acquisition by SAP.
In fact, some say SAP's top spot in business applications is affirmed by the merger. The company has grown organically - more or less - and continues to be quite successful.
Peter Goldmacher of SG Cowen says the deal is great news for Salesforce.com. The deal leaves no other players in hosted CRM while at the same time, endorses the value of the segment. Others say the deal will be the end of Salesforce.com.
Guess which camp CEO Marc Benioff landed in as the Oracle-Siebel deal hit on Day One of the annual Salesforce.com user conference? In fact, in memos to their employees, both Benioff and CEO Greg Gianforte of RightNow were anything but downbeat about their companies' prospects in light of Siebel's purchase.
Of course, the deal exposes significant challenges for Oracle. One area is the danger of security gaps as its many products are integrated. And that's not to mention the very large gorilla in the corner: the incredible challenge of integration and customer support faced by Oracle. With six acquisitions in the past two years - 4,000 application customers with the Siebel deal alone - it will be difficult for Oracle to swallow its acquisitions and keep everyone smiling.
As Evil Knievel once said, ""Anybody can jump a motorcycle. The trouble begins when you try to land it."
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