Oracle buy further tightens CRM market

Diversity in the enterprise business software market was kicked down a notch earlier this month when Oracle announced plans to purchase Siebel Systems. Siebel specializes in customer relationship management (CRM) software that many government agencies use.

Analysts say the acquisition puts the bulk of the business applications market into the hands of two companies: Oracle and SAP.

But large technology buyers such as the government may not mind the shrinking range of options because many of them want to cut the number of platforms they use to automate their business processes.

"When we talk to SAP customers, roughly half of them, when they look for new tools, don't look outside SAP," said Rob Bois, a senior research analyst at AMR Research.

Bois said Oracle will likely see a similar increase in loyalty among its customers as it integrates its line with Siebel's products and those from other recent acquisitions. The deal will also increase Oracle's presence in the government business applications market, where Siebel has been particularly strong, he added.

The Siebel products, which agencies use to automate contact centers and improve citizen services, will significantly enhance Oracle's CRM offering. Oracle has already expanded its capabilities to some extent through acquisitions. Most notably, it purchased PeopleSoft last year, which had bought JD Edwards and its business applications, including a CRM line, in 2003.

Siebel is a CRM pioneer and has been a market leader since the early 1990s. However, the lucrative and steadily growing CRM market, which was worth an estimated $8 billion to $10 billion in 2004, has attracted other competitors, such as SAP and Microsoft.

Oracle officials said the Siebel products will become the base set of CRM features and functions for Fusion, Oracle's next-generation suite of software applications. Meanwhile, Oracle plans to support the current set of Siebel products for some time to come, said Larry Ellison, the company's chief executive officer, during a conference call.

Both plans are positive news to Betsy Baumgart, administrator of Montana's promotion division, which recently finished installing a Siebel CRM system that will help state officials better promote tourism.

"All in all, we're feeling pretty comfortable with" Oracle's acquisition of Siebel, Baumgart said.