The “white flag” of despair at Siebel is the clearest signal of a significant shift quietly occurring in the software market. The era of million-dollar contracts is over, replaced by smaller, demand-driven transactions.
Oracle’s Dominance
After prolonged negotiations, the conditional surrender of PeopleSoft paved the way for Oracle’s new conquest strategy. When the Siebel board dismissed Mike Lawrie in April, less than a year after he took over as CEO, it became clear that Siebel had too little time to “overhaul” the entire company before shareholders reacted strongly.
Analysts questioned Oracle’s swift move in acquiring a new enterprise application suite so soon after merging with PeopleSoft. However, no one doubted that if Oracle showed interest, Siebel would promptly sell its technology. Thus, the media remained relatively calm when both parties announced a $5.85 billion deal last September.
The next two years will be a crucial transformation period for Oracle as the company actively develops a new enterprise application suite called Project Fusion, which will incorporate all features from the products they have acquired. Meanwhile, the “whale” of the software industry continues to seek new waters. Siebel is just one of many acquisition plans Oracle has announced this year. To date, Oracle dominates the enterprise application sector, but that position is quite fragile. Computer Associates (now CA) serves as a cautionary tale for Oracle. This former champion spent half a decade cleaning up the mess caused by lax management.
SaaS on the Rise
Software as a Service (SaaS) or on-demand software may not be a frequently mentioned term among analysts this year, but it continues to attract significant interest from customers. The pioneer, Salesforce.com, has seen an 80% revenue increase compared to 2004 in just the first nine months of the year, thanks to 350,000 CRM service subscriptions.
A plethora of startups have quickly flooded the SaaS market. Meanwhile, larger corporations are developing their strategies to compete with Salesforce.com. The giant SAP (Germany) announced that it will launch a SaaS product next year, while Siebel has taken a more cautious approach. After two years of operation, Siebel’s on-demand service has seen very modest growth, ending Q3 with only 44,000 users.
SOA Transforming Data Centers
Software companies claim to have found a new “guiding star” in the standardization process. Almost every manufacturer is revamping their application packages to fully leverage SOA (Service-Oriented Architecture), a method of connecting software components through web services. Forrester Research (USA) estimates that by the end of this year, about 77% of large enterprises will actively implement SOA.
SOA primarily consists of a collection of independent services. These services can connect and interact with one another, facilitating the easy flow of data or allowing 2-3 services to collaborate on processing a specific task. The first service-oriented architecture was DCOM or ORBs, developed based on the CORBA specifications.
Microsoft Goes Online
The world’s leading software corporation has built many fortresses and caused significant waves over its 30-year existence. However, the famous memo “The Internet Services Intervention” by Chief Technical Officer Ray Ozzie last October emphasized that the company needs to adjust to make “services” central in Microsoft’s upcoming products. Nevertheless, the corporation admits that “discovering the iceberg is not difficult, but steering the ship in the right direction is quite challenging.” The recent high-profile Windows Live campaign further demonstrates that Microsoft, a pioneer in software, is becoming a “latecomer” compared to leading internet companies like Yahoo and Google.
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