Siebel Rising

The company's acquisition of UpShot Corp. expands its penetration into the hosted CRM market.

Though Siebel Systems Inc. didn’t unveil its first hosted customer relationship management (CRM) offering until earlier this month, the CRM giant took a running jump into the hosted CRM market, announcing the acquisition of CRM application services provider (ASP) UpShot Corp. Analysts say the $70 million UpShot deal helps to immediately expand Siebel’s penetration into the hosted CRM market, which is currently dominated by competitors Salesforce.com and Salesnet among others.

Siebel announced its long-awaited CRM OnDemand hosted service earlier this month, in tandem with IBM Corp. http://info.101com.com/default.asp?id=3077. Although the company had previously backed a CRM portal site (Sales.com), analysts say CRM OnDemand is Siebel’s first foray into a hosted market that has been blunting the growth of conventional CRM applications.

So why did Siebel nab UpShot? Chief executive Thomas Siebel offered a typically optimistic perspective. “The UpShot acquisition advances our strategy of CRM for Everyone, our commitment to provide CRM solutions for every segment of the market, every type of organization, and every type of user,” he said in a statement.

The deal is not without complications. In the near-term, for example, Siebel has some brainstorming to do. First and foremost, analysts say, the company must decide how it’s going to reconcile the J2EE infrastructure of its CRM OnDemand service with the .NET underpinnings of UpShot’s technology. “There are some concerns about the cohesiveness of Siebel’s hosted strategy,” acknowledges Kelly Spang Ferguson, principal CRM analyst with consultancy Current Analysis Inc. She acknowledges the J2EE/.NET conflict but says there's another wrinkle: “There would seem to be inherent competition that will exist between UpShot and Siebel CRM OnDemand, and it remains to be seen how Siebel positions the two services in the near term.

Siebel has said it plans to complete the integration of the CRM OnDemand and UpShot services next year. The combined service will feature integration with Siebel’s conventional -- or “on premise” -- CRM applications.

UpShot is a long-time hosted CRM player and claims about 1,000 customers. As a result, Current Analysis’ Spang Ferguson says, the acquisition immediately catapults Siebel into more direct competition with rivals Salesforce.com and Salesnet. “[I]t is a way for Siebel to buy its way into the ASP market. With UpShot, Siebel now has 1,000 customers for its hosted service and gains UpShot’s four years of experience in this market,” she observes. “Siebel can gain some valuable insight into the ASP market by internalizing the business model and strategy by acquiring UpShot.”

There’s another aspect to the acquisition, notes Spang Ferguson: “Siebel is sending a clear signal that its second time around in the hosted market is going to be far more successful than its first attempt.”

Siebel rivals Salesforce.com and Salesnet wasted no time last week trying to capitalize on the customer uncertainty that usually attends such acquisitions. Both hosted CRM providers announced discounts, data migration services, and training to entice customers to abandon UpShot for their own services.

Also last week, Siebel announced the acquisition of Motiva Inc., a developer of a J2EE-based enterprise incentive management suite. Siebel says it will tap Motiva’s technology to enhance its own Incentive Compensation application, which is a component of its sales force automation suite. Siebel nabbed Motiva for just $3 million.

About the Author

Stephen Swoyer is a Nashville, TN-based freelance journalist who writes about technology.