Siebel hedges bets with IBM WebSphere deal

29 January 2003 Customer relationship management (CRM) software specialist Siebel is to invest $300 million (€275.9m) over the next three years in a joint development and sales agreement with systems giant IBM.

Under the terms of the agreement, 100 software engineers from each company will work to build a version of Siebel’s forthcoming Siebel 8 software suite to run on IBM’s WebSphere J2EE application server. The companies have also created a joint customer support desk for the product, which is due to be released in the next 12 to 14 months.

The alliance is similar to one announced between Siebel and Microsoft in October 2002, when the two companies pledged to jointly develop Siebel software that would be fully integrated into Microsoft’s .Net architecture – a rival to the J2EE standard supported by IBM.

However, there are some small differences between the two agreements. Siebel is putting $50 million (€46m) less into the Microsoft deal. Also, the IBM alliance is more focused on creating industry-specific CRM software products targeted at customers who previously would not have gained much value from buying packaged CRM software.

Both IBM and Microsoft will incorporate Siebel’s Universal Application Network (UAN) integration framework into their own integration products: Business Process Integrator and BizTalk respectively.

The IBM alliance is in effect an expansion of an existing joint sales and consultancy relationship that Siebel and IBM began in 1999. Since then the alliance has brought in more than $2 billion (€1.84bn) in licence revenues for Siebel from about 1000 customers, according to Siebel spokesmen.

The alliances with both IBM and Microsoft will help keep Siebel a key player in the CRM market as the technology industry adopts new web services and XML standards that both the J2EE and .Net architectures support.

However, it will be more than a year before either of these alliances begin to bear fruit. And in the meantime, Siebel is having difficulty keeping its business on an even keel during the technology spending downturn.

Over 2002, Siebel’s revenues fell 22% to $1.6 billion (€1.5bn). The company also reported a net loss of $35.7 million (€33.2m) compared to net income of $254.6 million (€236.8m) the year before.

In the fourth quarter sales slumped 19% to $394.7 million (€367.1m), compared to $487.8 million (€453.7m) for the same period a year earlier. Behind this decline was a 37% fall in software licence sales to $157.4 million (€146.4m), although services revenues remained flat.

Siebel’s problems are partly due to the cost and complexity of its software. CEO Tom Siebel has even admitted to analysts that the company’s software is too complex for the average user. “Siebel customers say they do not need more than 200 CRM [software] modules, 1,500 tables and an interface capable of landing the space shuttle,” said Rod Johnson, an analyst at AMR Research.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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