Oracle vs. Siebel, from Fortune
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fortune.com
Oracle and Siebel's Software Hardball
Rivals open a new front in an unusual, ongoing war of words. Does "CRM" stand for "competitor relationship management"?
By Melanie Warner
One of the strange aspects of business culture in Silicon Valley is that companies like to think they have no competitors. They do have competitors, of course, but rather than publicly draw the dagger, they operate as if the world were their partner.
Except, perhaps, for Oracle. The $10-billion-a-year Redwood Shores company has always been very clear about who its enemies are, and it has no greater rival than Siebel Systems. Ever since Tom Siebel left a top executive post at Oracle in 1990 and then started his epony- mous company three years later, Oracle's CEO Larry Ellison has set out to beat Siebel at his own game.
He's still trying. Siebel Systems is far and away the dominant leader in the so-called CRM (customer relationship management) market for corporate software, with a 21% share of the market. Oracle, on the other hand, is a leader in big corporate back-office and database systems, but it has just 6% of the CRM market. Ellison intends to change that.
Oracle's head of CRM, Mark Barrenchea, boasts that Oracle will own half the market in the next few years. To that end, he's lately been out thumping OracleSalesOnline, a product that mirrors Siebel's flagship sales-force automation product. Oracle is giving it away to customers over the Web in the hopes that companies will find the idea of getting free software over the Internet preferable to that of paying the hundreds of thousands of dollars required to install Siebel's software. Corporate users can access Siebel's sales-force automation product with a Web browser, but big chunks of software still need to be installed on the users' computer servers. "We want to build market share, and we want to do it fast," says Barrenchea.
It's easy to see why. CRM software, which is used by a company's sales and customer service representatives to help them communicate and keep track of customer accounts, is the hot area in corporate software. After five years of explosive growth, analysts are projecting it will continue to grow at more than 35% a year over the next couple of years. Just to get you fully up to speed in acronym land, follow this: AMR Research in Boston predicts that CRM or ERM (e-business relationship management) will become a $20.8 billion market by 2004, making it as big as ERP (enterprise resource planning software), which is one of Oracle's top businesses. Unlike CRM, though, the ERP market is growing at only 5% a year.
CEO Siebel knows he's the undisputed 800-pound gorilla in a hot market and sees his former boss's rumblings as old news. "Today all they [Oracle] have is a news release they put out once a year in the spring that says they're the world's biggest solution. If Oracle had products that were functionally equivalent to ours with the performance characteristics of ours, then they would be selling a lot of products, but they're not," says Siebel, who lives in the same town as Ellison and who sends his kids to the same school.
Tom Siebel regards Oracle's competitive thrusts as little more than empty chest-pounding and misleading press releases. The accusation that Siebel's products aren't Web-ready particularly rankles him. When Oracle ran ads last year saying that its software was 100% Web-based and that Siebel's wasn't, Siebel Systems unleashed a barrage of threatening letters from company lawyers, charging that the ads were slanderous and demanding Oracle stop running them, which it eventually did. "If this is a marathon, we want to win by training and eating right. And the way Larry Ellison wants to win the race is by severing the Achilles' tendons of all his competitors," seethes Siebel.
Oracle does have a way of being slightly misleading. In a recent earnings release enthusiastically titled "Suite Victory for Oracle's CRM: Grows 166% in Most Recently Announced Quarter," Oracle cited 3COM, Excite@Home, and BellSouth as big, new, exciting customers. The problem is that they also happen to be Siebel customers and have made considerably larger purchases from Siebel than from Oracle. Oracle is being used within divisions of these companies, whereas Siebel is deployed throughout the company, or "enterprise-wide." At Excite@Home, only the rather small MatchLogic division is using Oracle CRM software; at 3COM, it's the Palm Computing division; and at BellSouth, the DSL unit. So technically these companies are Oracle customers, but they're not huge deals. Barrenchea says Oracle has since won other enterprise-wide contracts for clients such as JDS Uniphase. "We have an entire e-business suite that customers want," he says.
It's likely that as Oracle continues to make more noise about its efforts to snatch a piece of this market, Siebel Systems will shoot back with more charges of hype. Siebel believes that Oracle is counting parts of its bread-and-butter database software as CRM to inflate the numbers. "There are no [generally accepted] accounting principles on how you allocate the license revenue among sources. You can kind of say anything you want," says Siebel.
Barrenchea denies that Oracle is playing accounting games. "There's fact and then there's Siebel rhetoric," he says.
Let the games begin. |
