The applications industry saw further consolidation this week with Oracle’s purchase of Siebel . This is a logical step for Oracle, who need to bulk up in order to feed their struggle with SAP in the applications war, though after Peoplesoft (and hence JD Edwards), Siebel may yet cause some indigestion. It was well known on the industry that Siebel has struggled of late after its meteoric growth in the boom years. Clauia Imhoff amusingly refers to this acquisition as “donkeys can fly” on her blog. I don’t think that she intended that as praise. Siebel’s revenues shrank last year and there has been an exodus of management.

While the idea of customer relationship management is a noble one, Siebel was partly a victim of its own aggressive marketing hype, which promised much more than it delivered. Firstly, given the broad landscape of deployed applications in large companies, it was unrealistic to expect one application to “own” the customer. Worse, Siebel was long on marketing slides and short on well engineered code. A friend working at a bank who spent two years implementing Siebel described it as a “multi million dollar compiler”, since almost every function that they required was not in the core product, and required lengthy and expensive coding from Siebel consultants.

Another friend working at a giant corporation reckoned that their Siebel rollout cost more than their SAP rollout, and that was not meant as a compliment to SAP. Large companies (though not of course system integrators) had become disillusioned with these massive systems integration projects, while Salesforce.com showed just how much was possible in a relatively simple, hosted environment. When the giant deals dried up after the internet bubble collapsed, Siebel was ill suited to adapt to the more difficult sales climate, and a host of executive changes at the top were just the tip of the iceberg, with an exodus in the last year or so of mid-level staff. However, just as breeding two elephants rarely produces a gazelle, the disappearance of Siebel into Oracle’s maw does not solve the issue of customer integration in large companies. The definition of “customer” is still spread amongst every application that needs to reference it, which includes sales force systems but also billing systems, marketing systems and support systems. In time there will be one less definition around as Siebel is absorbed, but this barely scratches the surface of the problem of reducing the complexity of dealing with multiple definitions of master data such as “customer”, as there will still be dozens of sources of this data around. As discussed elsewhere , this requires tools that are not built on the assumption that they are the one and only source of the truth.

Bloor analyst Harriet Fryman’s article “mastering master data” raises some excellent points. She correctly points out that master data i.e. things other than business transactions, (such as “price”, “customer”, “brand”, “product”, etc) are hopelessly fragmented in every organization of any size. Research from Tower Group indicates that a large company has 11 separate systems that think they own the master definitions of “product”, and this always seemed to me an optimistic number. In the two global corporations I have worked in the number would be in the hundreds.

This is partly because even if you have a single ERP vendor, every separate implementation of that ERP system has a slightly different definition, and ERP systems are only some of the many systems that need master data. Since the major application vendors concentrate on turf-grabbing from each other (as we see this week with Oracle’s takeover of the ailing Siebel) it is not in their interests to make it easy for other systems to interact with theirs. Their answer is “buy everything from us,” a wholly impractical situation since no one vendor (not even SAP) covers more than 30-70% of a company’s business needs (and that is according to SAP’s ex CEO). Hence the big application vendors are ill-suited to pick up the crown of the master data kingdom.

Instead what is needed are applications that are designed from the outset on the assumption that there are many, related versions of the truth, and that software has to be able to deal with this. This was the assumption on which KALIDO was developed at Shell, and any other vendor hoping to gain significant market share in this area needs to be able to deal with this reality also. Paradoxically, because the apps vendors are locked like dinosaurs in their “footprint” wars, I believe it will be the small furry mammal equivalents in software who will be able to produce working solutions here, since they do not have a massive legacy of application code to defend. Roll on the evolution.