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What Happened to Siebel?

Oracle Rescues Siebel, and Gets Technology for Fusion CRM

Siebel had long been a force in the customer relationship management (CRM) market. With more than 3.4 million users at over 4,000 customer sites around the world, strong alliances with the likes of IBM and HP, a handful of strategic acquisitions aimed at closing major functionality gaps, market capitalization of over $4 billion, and a renewed focus on customer value and operational efficiency, Siebel seemed well-positioned to outlast many of its rivals. But, it soon became obvious that all was not well with the software giant.

Siebel was founded in 1993 by Tom Siebel. The company quickly became the undisputed leader among all vendors in the customer relationship management field, grabbing as much as 45 percent of market share by 2002. Siebel’s powerful platform and expansive feature stack won favor among customers and industry experts alike.

Before long, however, marketplace perception of on-premise CRM solutions began to shift. Less expensive on-demand applications that provided the same level of functionality, without the hassle of a long implementation or a large up-front investment, were being introduced.

These hosted solutions provided small and mid-sized businesses with a more affordable and cost-effective alternative to enterprise-scale CRM systems. Even large organizations began to believe that on-site customer relationship management came with a total cost of ownership that was way too high. In response to this trend, Siebel acquired hosted solution provider UpShot in 2003 and launched an on-demand, Web-based version of its CRM suite.

In spite of its efforts, Siebel would watch its reputation tarnish over the next several years. The primary cause was its poor service and support, which led to strained relationships with its customers, as well as key strategic partners.

The trouble really started brewing in 2005, when as early as January, industry analysts began to question Siebel’s viability and wonder about its future. Massachusetts-based IDC called Siebel a “sitting duck,” while AMR Research cited major flaws in some of the company’s go-to-market models and sales strategies. Additionally, competition from enterprise software vendors such as Oracle and SAP began to intensify, closing the market share gap. And, the popularity of cheaper on-demand offerings was picking up steam, and vendors like began to make their presence known.

Then in April, Siebel Chief Executive Mike Lawrie left the company. Many experts felt that Lawrie was the company’s last hope to transform itself into the kind of customer-friendly, process-focused organization it needed to be. His abrupt departure came after less than one year on the job and immediately following some rather disappointing quarterly financial results.

After months of speculation, Oracle finally came to the rescue. By the end of the year, Oracle had solidified a deal to purchase Siebel for $5.8 billion. The acquisition, which went much smoother than Oracle’s hostile takeover of PeopleSoft, was finalized in early 2006. The Siebel product portfolio immediately began to form the foundation for Oracle’s yet-to-be-released Fusion CRM. Fusion CRM will integrate the various products Oracle obtained through its string of CRM-related acquisitions, including JD Edwards, Retek, and PeopleSoft.