By Siobhan Kennedy
Siebel Systems Inc needs to buy a back office software vendor to stand a chance of competing with Oracle Corp, and rumor on the street has it that PeopleSoft would be its best bet. Over the last few months, Siebel and Oracle have been waging a war of words in the front office space, and while Siebel is still acknowledged as the number one customer relationship management vendor, analysts say it needs to develop a back office integration strategy pretty fast or risk having the CRM rug pulled from under its feet. They say the key to Siebel, Oracle or any company’s future success in this space is the integration of front office CRM software with back end, enterprise resource planning applications. While most vendors are happy to talk integration, few are actually offering it yet. But analysts say that Oracle, which has both CRM and ERP software, could beat Siebel to the post. It’s already using an aggressive marketing campaign to try to tempt away Siebel users – 80% of whom run their CRM applications on Oracle databases – to Oracle’s applications, but if it can offer integration with their back office software then that’s a much more compelling argument. If companies think they’ll get back end-to-front end integration, they might be happy to ditch Siebel and go with Oracle instead. And that’s exactly what some analysts are predicting will happen, unless Siebel buys an ERP vendor soon.
Predictably, spokespeople for PeopleSoft and Siebel said their companies couldn’t comment on rumor and speculation. The spokesperson for Siebel added that the CRM vendor has always stated that its strategy is to partner and not to acquire, in the ERP space. We already partner with a number of vendors, including PeopleSoft and JD Edwards, to offer integrated versions of our products. Why would we want to buy one? The answer, says Peggy Menconi, an analyst with AMR Research in Boston is quite simple. Siebel has to look at it from the customer’s point of view, she says, if it really wants to compete with Oracle it can’t put its future into the hands of PeopleSoft or JD Edwards and rely on them for integration. Menconi says there will always be customers with different versions of software, and some of them will get stuck trying to make their products work with current Siebel offerings. There will still be integration issues, Menconi said, adding that she thought software integration is always much deeper when a company actually acquires, rather than just partners, another vendor.
Menconi says it makes absolute sense for Siebel to buy PeopleSoft. In terms of competing suites, they’d be a perfect match, she says. Menconi says the CRM market is increasingly being split between those vendors, like Siebel, who are targeting the service related industries including financial, healthcare and telecoms companies which account for 70% of the market, and those that are offering their products into the traditional manufacturing, supply chain vendors. It makes no sense for Siebel to market its software with manufacturing companies, it’s just not their traditional market, she said, but a merger with PeopleSoft would give it HR and accounting functionality that would provide valuable links to the back office. It would put Siebel in an incredibly strong position.
Other analysts agreed. One said that PeopleSoft, which is floundering with management upsets, and with no real leadership to help it get back on its feet, is ripe for acquisition. It would make a great match for Siebel. PeopleSoft’s practically in its back yard and it has a decent core of technology. And with the ERP vendors stock price falling practically every day, the acquisition would be a drop in the ocean for Siebel, whose forthcoming second quarter revenues are estimated at $148m, up from $90m the year before. Moreover, Craig Conway, the company’s new CEO, is a ‘fix it up and sell it guy’ and any deal that would help him increase shareholder value is bound to appeal.
The analyst also pointed to Siebel’s recent hiring of Paul Wahl and Jeremy Cootes, SAP America Inc’s former CEO and president respectively, as a signal that the CRM vendor is on the acquisition warpath. They’re not the kind of guys that would be happy to sit around and be content to build a CRM company, he said, they’re the sort of people that will run an acquisition program. Wahl especially, is the man credited with putting SAP America on the map. He pushed it up a very steep hill and did a hell of a good job of it, the analyst said. He built an empire once and I see both he and Cootes as the types that will want to do that again. So too will the company’s forthright CEO, Tom Siebel. He will stop at nothing to one-up Oracle. He’s the kind of guy that tends towards big dramatic moves, he’s looking for big hit; something that propels him into head to head competition with Oracle.
But not everyone thinks PeopleSoft and Siebel would make the perfect match. The CEO of one ISV that makes its living out of integrating PeopleSoft applications, says the union makes no sense for Siebel. He says that the CRM vendor is targeting high growth, highly competitive markets where its CRM software can bring companies a competitive advantage. This is in contrast to PeopleSoft, which wins 80% of its deals are in the public sector, as well as integrating other application data sources.
In addition, while Siebel is busy marketing its applications as web-enabled, PeopleSoft’s internet strategy is as clear as mud. Recently the company backtracked on its much-hyped e-commerce initiative, PSBN (PeopleSoft Buiness Network) and most ISVs are still not sure exactly what the ERP vendor is doing in that space, the CEO said. Moreover, Siebel’s license momentum is way ahead of PeopleSoft’s, which would serve to drag Siebel down, he added.
If Siebel is determined to get into ERP, then a better fit would be one of the fast growing, mid-market companies like Lawson Software or JD Edwards, he says, while PeopleSoft would make a good match for either IBM or Microsoft, who could use the ERP vendor’s 7,000-strong installed base to push their own range of products.
Whatever Siebel does, Menconi says it’s got to address the integration issue very soon. It needs to do it pretty quick or Oracle will gain more and more traction, he said. Already, the latest version of its CRM suite, 3i, offers some nifty back office integration, but the next version will go even further. It [Siebel] doesn’t want to be going through the pain and agony of a merger when Oracle’s going through its power curve. It did very well with the Scopus merger and there’s no reason why it couldn’t incorporate an ERP vendor just as fast.
