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For a merger that was all about managing relationships, Larry Ellison and Tom Siebel were putting their best face on getting along on Monday.

The chief executives of Oracle and Siebel have been savage competitors over the years. Industry observers recounted on Monday how Tom Siebel once turned up with cuts and bruises on his face and joked that he had run into Larry Ellison in a bar.

Then there was the time Larry Ellison summoned his rival to his office and ripped up in front of him a contract scheduled to be signed by the two companies, the Siebel Observer newsletter recalled.

Many of Siebel’s employees including its founder are former Oracle workers and, although a major rationalisation of its corporate centre is certain, most should be returning to the fold.

There had been a growing inevitability about the reunification.

“This discussion has been going on between Siebel and Oracle for years,” said Mr Siebel. “Larry and I know each other very well. We started working together 23 years ago and so this is kind of a natural business combination that really is a
customer-driven event.”

“Thanks to Tom Siebel for putting this deal together . . . I hope Tom is going to be working with us . . . for some number of years,” said Mr Ellison in a rare show of bonhomie.

The timing of the deal, according to Oracle, had been set by its need to digest its acquisition of PeopleSoft – a $10.5bn deal finalised this year. But it has also picked off Siebel at a low point for the company – it lost its number one spot in business applications to larger German rival SAP last year and has seen its position eroded by a young upstart, Salesforce.com, in serving applications on-demand over the internet.

“The same thing that happened to PeopleSoft will happen to Siebel, it will die,” predicted Marc Benioff, Salesforce chief executive, yesterday. “Siebel on Demand, a joint venture between Siebel and IBM, will be the first to be buried.”

But Paul Hamerman, Forrester Research analyst, said the ability to earn regular payments for hosting customers’ software so they could run it remotely over the internet was a key attraction for Oracle.

“Oracle needs an on-demand offering. It has had on-demand services but not really an on-demand application offering.

“We are seeing a lot of acceptance of the subscription model, particularly in the mid-market,” he said.

Oracle might have completed its major acquisitions in CRM (customer relationship management) to shore up its position against SAP and Microsoft, but it could still be looking for smaller deals in certain industries.

“They want to go deeper into service-oriented industries, where they could establish leadership over SAP,” said Mr Hamerman, citing the banking, retail and telecoms sectors.

While Mr Ellison may feel he has done enough dealing to strengthen business applications, he might want to expand into infrastructure software, application servers and business intelligence in the future, where SAP is still dominant.

In the meantime, he has the job of integrating Siebel and selling CRM solutions to customers jaded by the lacklustre results achieved from older systems.

“Oracle risks trying to integrate too many pieces at once,” said Octavio Marenzi of research company Celent.

“At the same time, the CRM market has lost its bloom, with many large firms reluctant to engage in big CRM projects.”

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