Will Oracle's Buyout Binge Alienate Customers?

Some analysts say there is such a thing as getting too big too fast. And some customers may pay the price if Oracle doesn't integrate all these systems well, and quickly, and if they don't come up with a clear roadmap -- soon.


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Posted September 13, 2005

Sharon Gaudin

Industry watchers warn that Oracle's voracious ways may leave the software giant unfocused and ultimately may push some users to hook up with smaller, unencumbered, competitors.

There is, analysts say, such a thing as too big, too fast.

''I think this could hurt [Oracle],'' says Janet White, a research analyst with London, Ontario-based Info-Tech Research Group. ''I think they've made some strategic acquisitions. But they've got so many large, unintegrated systems that they have to maintain with their huge installed base that they're not going to have a lot of time to integrate those systems or come up with new products.

''And because they've purchased so many systems recently, it hasn't been really clear where their product roadmap is going,'' White adds. ''That makes buyers wary. They want to wait and see where they're going. Oracle has taken itself off a lot of short lists for potential buyers.''

The announcement came Monday that Oracle is acquiring Customer Relationship Management software maker Siebel Systems in a $5.85 billion cash and stock deal. Larry Ellison, CEO or Oracle, said the merger is designed to make Oracle ''the number one CRM applications company in the world''.

The deal comes after Siebel struggled financially for months, failing to meet analyst projections for more than a year. So for some Siebel customers, this move may come as a relief, according to Rob Bois, research director for customer management strategies at Boston-based AMR Research.

''As a customer of Siebel, I'd be less nervous now because the future of the company has been uncertain over the last few quarters,'' says Bois. ''We talked to a number of Siebel customers who hadn't been willing to invest further in them with their lack of clarity and financial stability. Now they have a large, very stable company that will own their product. They know that several years down the road they have to move over to Oracle or stay with something that is unsupported, but that is several years down the road.''

Oracle's Voracious Appetite

However, when it comes to Oracle -- it's business and its customers -- industry analysts wonder if all of these acquisition moves can really be that healthy. When does voracious business consumption become gluttony?

When you're talking about Oracle's buyout of Siebel, keep in mind, analysts say, that this isn't the only acquisition that has been on Oracle's plate lately. Just this past January, Oracle closed the deal on its acquisition of PeopleSoft. Before that, Ellison outbid SAP for Retek Inc. And mix in with all of this, the fact that Oracle has gobbled up a smattering of smaller companies.

''I don't want to guess how many companies they've purchased recently, but there's a lot,'' says White.

All of these purchases, adds White, means that Oracle has more systems to integrate, more personnel issues and layoffs to oversee and less time to focus on creating a straightforward product roadmap. And that may leave customers feeling jittery.

''Oracle has its fingers in so many pies right now,'' says White. ''Customers don't know where things are going. They're locked into a technology that is very expensive and they can't easily get out of. To implement a CRM system like Siebel can cost hundreds of thousands if not millions of dollars. It's a very expensive technology to leave, and now they're not sure where their product roadmap is going. You have to wander what's going to happen to them in five or 10 years.''

A Good Deal for Customers?

Jonathan Eunice, founder and principal analyst at Nashua, N.H.-based Illuminata, says it makes great business sense for Oracle to buy Siebel, but it may not be as good a deal for the company's customers.

''It's actually a pretty smart move economically, because the cost of developing in an entrenched market something that's good enough to sway people who have an entrenched solution takes a lot of time and a lot of money. This way it's a lot faster to accomplish,'' says Eunice. ''The problem from the customer side is that what's good for Oracle is not necessarily good for the customer... They have become voracious and have moved into an aggressive acquisition mode.... For instance, they're laying off a substantial number of people at PeopleSoft, and as a result, the lines of communication between the PeopleSoft technicians and the channels are very disrupted these days. It isn't necessarily as pleasant for the customer as it is for Oracle.''

Eunice also says Oracle executives seem to be taking on a new attitude, and it's one that's not so warm and fuzzy if you're a customer.

''I think the question is whether Oracle will be as focused on the customer as the customer would like,'' he adds. ''I don't think it's strictly because of the acquisition activity. It has as much to do with the attitude of the acquirer. If the acquirer has the mentality of 'we bought your system, therefore we bought you'... If it's a 'we own you' mentality -- and that's not unexpected -- that's not an attitude that says, 'we're going to develop a lot of good stuff for you and we're going to do it with you on board'. That's as important to the customer outcome as how much time they spend on integration activities.''

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