29 August 2002 Microsoft plans to end its three-year agreement to resell Siebel’s mid-market customer relationship management software, according to a report in US technology publication InfoWorld.
The agreement will expire at the end of 2002, but both companies will continue to support existing customers, said the report.
The move is a further indication that Microsoft intends to acquire or develop its own software in the business applications market. This follows two key acquisitions: of mid-market CRM vendor Great Plains in December 2000 and Danish enterprise applications vendor Navision in March 2002.
Microsoft inherited the Siebel reseller agreement with its Great Plains purchase. Great Plains had resold a scaled-down version of Siebel’s CRM applications suite to small and medium-sized businesses (SMBs). But in February 2002, Microsoft announced plans to release its own CRM suite, known as Microsoft CRM, in the fourth quarter of 2002.
Historically, Siebel has directly targeted large, multi-national businesses, typically winning several deals worth in excess of $5 million per quarter. Although the company has developed a mid-market version of its applications suite, it has tended to use reseller deals as its main route to the SMB market.
However, these partnerships have begun to unravel. In August 2001, enterprise resource planning (ERP) software supplier JD Edwards ended a reseller deal with Siebel after acquiring smaller rival YOUcentric. The end of the Great Plains deal leaves Siebel with fewer routes to the mid-market CRM space.
Siebel argues that sales will not be affected because it sells direct to customers, whereas Microsoft plans to use value added resellers (VARs) as its core sales channel. But Erin Kinikin, a Giga Information Group analyst, believes this will put Siebel at a disadvantage as smaller businesses favour the reseller channel.
Furthermore, she adds, many of these businesses will choose Microsoft CRM because it is based heavily on Great Plains and Navision technology and ought to offer easier back-end integration with packages from these vendors.
