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Microsoft and SAP executives should be thanking their lucky stars. Oracle’s proposed buyout of CRM market leader Siebel, on top of its earlier purchase of PeopleSoft, will undoubtedly make it a CRM powerhouse and the leading CRM vendor in the industry. Believe it or not, Larry Ellison just did the folks at SAP and Microsoft, and other smaller CRM vendors a huge favor for two main reasons.

Reason No. 1: The future of the CRM market lies in the SMB (small and midsize business) space. The real growth area for CRM going forward will be SMBs looking to more effectively and efficiently gather customer data and target-market to them. SMBs need to work with their technology providers that understand their unique needs and solve their IT problems. They need handholding, dedicated support personnel and most of all, responsiveness.

This can be accomplished only through the VAR community, as we all know. VARs own the SMB market, and the only way a CRM vendor is going to penetrate this business segment is to have a comprehensive and rich channel strategy. Selling CRM to small business takes a lot of time, effort and trust. In a previous column on CRM, I quoted Barton Goldenberg, president and founder of ISM, a CRM consultant firm, as saying that only 20 percent of SMBs out there have deployed a CRM application and that he expects the CRM SMB market to reach $44 billion per year within the next five years.

But this is more a strategy sell than a technology sell. VARs are entrenched in their accounts and have the ability to customize a CRM solution that fits in well with their customer’s business initiatives and needs.

Technology aside, this has never been one of Siebel’s strengths. Although the company has for years tried to gain a bigger foothold in the SMB space with cheaper and less loaded versions of its CRM platform, its bread and butter has been the enterprise. Oracle isn’t exactly known for its SMB prowess either, to say the least.

What Oracle basically has done is consolidate the enterprise CRM space, where some large integrators and consultants play, but not the average VAR.

Reason No. 2: Oracle doesn’t exactly give the channel a warm and fuzzy feeling. It never has. Oracle’s relationship with the channel has been hot and cold for as long as I can remember. Its predominant direct sales force has burned more than just a few integrators, and many are constantly looking over their shoulder waiting for the vendor to come in and take business away.

To be fair, Oracle has had some success in working with channel partners on top accounts, but trust has always been an issue. The acquisition of Siebel enhances this direct enterprise business and will do little to advance its channel relationships. Being a bigger, direct enterprise company may actually alienate its existing channel partners.

We’ll see.

So in my view, Oracle being king of the CRM mountain will create opportunity for CRM vendors such as SAP and Microsoft that have painstakingly built a channel presence and specifically targeted the SMB space.

Elliot Markowitz is editor-at-large of the Channel Insider. He is also editorial director of Ziff Davis’ eSeminars. He can be reached at