Will Oracle's Buyout Binge Alienate Customers?

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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