Oracle claims top spot in CRM with Siebel buy

13 Sep 2005

Oracle claims to be the No 1 customer relationship management (CRM) provider following news that it is acquiring the software company Siebel Systems for US$5.85bn.

The board of directors at Siebel, one of the world’s largest CRM software supplier, has voted in favour of the deal. Company chairman and founder Tom Siebel has agreed to vote his shares in favour of the acquisition, which is expected to close early next year.

Oracle president and chief financial officer Greg Maffei said the deal would add to Oracle’s earnings in its first full year. “Longer term, Siebel will contribute to Oracle’s stated goal of 20pc annual earnings growth. Given the size of our existing research and development investment, the scale of our global support infrastructure and the similarity of our back-office requirements, we will recognise substantial efficiencies from combining our two businesses,” he said.

The market for CRM applications, which capture and streamline all customer interactions so CRM users can better understand, service and anticipate their own customers’ needs, is a growing one. The research firm IDC said the CRM market was worth US$8bn in 2004.

According to Oracle, a “significant majority” of Siebel implementations run on the Oracle database, a point acknowledged by Oracle president Charles Phillips, who claimed the company’s joint customers had been recommending such a deal for some time. “We will embrace Siebel’s best-in-class CRM products and make the features of those products the centrepiece of our Project Fusion CRM,” said Phillips.

Oracle CEO Larry Ellison said in a statement: “In a single step, Oracle becomes the No 1 CRM applications company in the world. Siebel’s 4,000 applications customers and 3.4 million CRM users strengthen our No 1 position in applications in North America and move us closer to the No 1 position in applications globally.”

Siebel had been in some disarray following the dismissal of CEO Mike Lawrie in May after less than a year in the job. The company embarked on a restructuring drive at the same time. According to some reports, observers suggested that Lawrie’s replacement, George Shaheen, had been brought in to sell the company. That Oracle, the world’s second largest software company, was the buyer is not surprising; the company had earmarked Siebel as a potential target during its protracted acquisition of PeopleSoft.

David Bradshaw, principal analyst with the European research firm Ovum, told it was a good deal for Oracle. “It’s a really good fit for Oracle because it lacked a really strong CRM capability. This gives it an undisputed CRM product to sell to everyone.”

He added that Oracle’s recent strategy of acquisitions is giving the company a foothold into new customer sites. “A lot of what Oracle is doing is buying an installed base that it can sell future products to,” he said.

Both Oracle and Siebel have offices in Ireland but it is not yet clear what effect, if any, the deal will have on these operations.

By Gordon Smith