If practice makes perfect, Oracle Corp. may one day write the book on how to integrate acquired companies without losing revenue-generating customers in the process. For now, Oracle executives could probably only pen a draft version.
The database and software titan and self-proclaimed industry consolidator has been absorbing companies furiously, in keeping with CEO Larry Ellison's goal of making Oracle the planet's largest provider of business software applications. Oracle now holds the top spot in North America, but cedes the world title to Germany's SAP AG.
During the past two years Oracle has spent a good $20 billion acquiring technology companies offering a range of products and services. After waging a very nasty and very public battle for business software vendor PeopleSoft Inc.--and enduring a seven-month federal antitrust trial in the process--the Redwood Shores, Calif.-based serial acquirer quickly moved back into dealmaking mode, gobbling up another half-dozen technology companies including clinical trial management software provider SiteWorks Solutions Inc. and security software maker Thor Technologies Inc. All this while trying to digest PeopleSoft, a company still in integration mode itself, given its previous $1.8 billion purchase of JD Edwards, finalized in July 2003.
But Oracle didn't stop there. By the time the $10.8 billion PeopleSoft deal closed in January 2005, Ellison and company had already set their sights on another sizeable rival, customer relationship management vendor Siebel Systems Inc., and in short order expects to close that $5.85 billion acquisition (shareholders were scheduled to vote on the deal Jan. 31).
The PeopleSoft and Siebel deals alone bring more than 15,000 corporate customers to Oracle, as well as disparate applications that Oracle plans to cobble together in a gigantic undertaking called Project Fusion. But the customers themselves, and the rich streams of maintenance revenues they provide, are the main motivation for the deals. William Band, an enterprise applications analyst at Forrester Research Inc., says that should keep Oracle focused on customer retention. Still, keeping all those customers happy, while contending with the hurdles of meshing the varied technologies, is no simple task.
"How much time will Oracle really have to integrate its existing portfolio, or create innovative new products, when it has to spend most of its time maintaining disparate, monolithic systems acquired through its recent acquisitions of PeopleSoft, JD Edwards and now Siebel?" asks Janet White, an analyst at Info-Tech Research Group, in a recent report. Given the high price tags associated with the enterprise systems of PeopleSoft and Siebel, those customers aren't likely to make any rash decisions to cut and run. That doesn't mean Oracle shouldn't look over its shoulder, especially with SAP running marketing campaigns targeting Oracle's newly acquired customers in an attempt to grab market share.
Oracle says its customer integration efforts improve with every deal, and it can manage integrations by listening and responding to customer concerns, and reassuring customers that current technology won't be discontinued without ample notice.
| Welcome to the Oracle family |
|
Target |
Closed |
Software product |
No. of customers |
Acquisition rationale |
| Siebel Systems Inc. |
projected early 2006 |
Customer Relationship Management |
4,000 |
Makes Oracle biggest CRM provider |
| Retek Inc. |
March 2005 |
Retail management |
200 |
Blocks bid by rival SAP AG |
| PeopleSoft Inc. |
Dec-04 |
Business application |
11,000 |
Makes Oracle second-largest applications vendor, behind SAP |
|
Source: Corporate Dealmaker magazine |
"It is fair to say that going into the PeopleSoft post-acquisition integration efforts, we took a very different approach," says Jeb Dasteel, Oracle's vice president of customer programs. "When PeopleSoft really started to come together, we had a whole team focused on efforts to integrate customers." He also says Oracle learned quite a bit from the way PeopleSoft communicated with customers and managed its customer loyalty programs. Oracle's customer integration game plan may be improving, but anxiety among customers about possible fallout following acquisitions is a given. "It was a little scary for us, because we use PeopleSoft for everything we do," says one PeopleSoft user, a director of IT training and end-user support for a statewide system of nearly 30 community and technical colleges. PeopleSoft applications underpin all of the system's financial tracking, including accounting, purchases, student aid and admissions. "Any time there's a change in structure, everyone gets nervous," the director says.
While there have been no widespread technology disruptions, the impact on customer support came swiftly after Oracle's deal for PeopleSoft closed, according to the IT director, who asked not to be named. "Everyone that I worked with was fired from PeopleSoft, a good 75 people. Right now they are attempting to hire those people back."
Dasteel, whose group handles corporate accounts, says: "We retained the vast majority of engineers and support team members through that organization [PeopleSoft]," but added he couldn't address the concerns of noncorporate customers.
Perhaps most frustrating for the college system was the $5,000 spent to send an IT employee for a week's worth of off-site training with Oracle, only to find that trainees had to share computers. "It is ridiculous to think a corporation the size of Oracle would have people paying $5,000 and have to share a computer," the PeopleSoft user says. "They would never send their own employees to something like that."
An Oracle representative declined to comment on the IT director's experiences. But Ellison did reach out to Oracle's newly acquired higher educational customers at a meeting in March. "They announced they were going to have a new product in 2008 that combines PeopleSoft and Oracle, but very little information. Since then, we've gotten more," says the director, who adds that the users hope to get more detail at this year's meeting.
Simple as it seems, Oracle's most important post-acquisition task has been to reassure customers that it has no immediate plans to pull the plug on acquired product lines. "Customers are telling Oracle they chose the products, made a big investment and don't want to have to change until it makes business sense for them to do so," Forrester's Band says. "Oracle has changed its approach and accommodated that."
The company, according to Dasteel, now segments its acquired customer populations, with the largest corporations given priority in terms of customer outreach and providing product development input to Oracle. Customers are also separated into user groups based on interests and desires--a feature of PeopleSoft's customer management program--so Oracle can better respond to their collective needs. The company also closely tracks communication with post-acquisition customers, making sure to follow up and capture the feedback in a centralized way, says Dasteel.
In addition, just before closing the PeopleSoft deal, Oracle set up its first CIO advisory board, consisting of 25 chief information officers from its largest corporate customers, who meet quarterly with Oracle representatives to air their concerns. Plans are under way to form a similar group of telecommunications senior executives in early 2006.
Beyond talking to customers, Oracle is putting into place Web-based surveys, with plans to poll users 90 days after the close of an acquisition. The surveys will then continue, in 90- to 180-day increments. The idea is to collect and monitor customer concerns, with a system for measuring whether issues are being addressed, Dasteel says.
"The PeopleSoft acquisition looked like it could be very acrimonious, and it seemed to change their ways," says Band, the Forrester analyst. "They have an economic reason to listen to their customers."
No kidding: They cost nearly $1 million a piece. - Kate Gibson
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