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Competitors Fire Back at Siebel...Again

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Posted October 22, 2003 By Kevin Newcomb     Feedback

Following last week's announcement by Siebel Systems that it will acquire hosted CRM provider UpShot, competitors fired the requisite counterstrike offering UpShot users assistance in migrating to their CRM platform.

Following last week's announcement by Siebel Systems that it will acquire hosted CRM provider UpShot, competitors fired the requisite counterstrike offering UpShot users assistance in migrating to their CRM platform.

Salesnet offered a "Trade-Up Choice Program", offering free migration, product discounts and migration services for UpShot customers. Salesforce.com launched the SureShot Migration Program, which includes a specialized migration tool, free training, and free admission to salesforce.com's upcoming Dreamforce user conference.

Both companies, of course, expressed their belief that UpShot customers would be better off with their competing product in the long run.

"Siebel doesn't have a great track record within the online CRM space and this acquisition is a losing proposition for UpShot customers because they are now on a technology dead-end, where Siebel will control how and when they migrate," said Mike Doyle, chairman and CEO of Salesnet.

Doyle was referring to sales.com, Siebel's first attempt to enter the online CRM industry in 1999. According to Doyle, sales.com was founded when the attractiveness of the hosted model was starting to affect Siebel's existing client/server license sales. Over the course of 2 years, Siebel sold, re-acquired, and then closed down the hosted service.

Siebel announced plans to re-enter the hosted arena in October 2003 with Siebel CRM OnDemand, a service to be offered in collaboration with IBM. The acquisition of UpShot follow closely on the heels of its CRM OnDemand plans, leading some to wonder at Siebel's strategy.

"Client/server vendors can't just jump into the hosted CRM market -- hosted CRM needs to be built from the ground up. Siebel has apparently learned this the hard way...twice," Doyle said. "After failing with Sales.com in 1999, Siebel again put dollars into developing Siebel CRM OnDemand and again realized its product would fail without help. It's clear Siebel is playing catch-up and trying to buy back two years of complacency."

Siebel plans to offer UpShot's CRM solutions as well as its own Siebel CRM OnDemand solution, with a roadmap to converge the best of both products into a next-generation hosted solution. When the converged product goes live, Siebel has promised it will provide customers with a seamless transition.

"We will continue to support every UpShot customer indefinitely," said Siebel's chairman and CEO Thomas M. Siebel in a letter to UpShot customers. "Siebel Systems is fully committed to the hosted CRM market. Our objective is to provide the industry's best hosted CRM solutions -- CRM that is fast, easy, and affordable." Salesforce.com chairman and CEO Marc Benioff said that is not enough assurance for UpShot's customers. "Discontinued Siebel UpShot customers have every right to be concerned. Siebel has said that they will do no further development of the UpShot product, and that they want to move UpShot customers to a new, un-tested, and as-yet unavailable first-generation Siebel OnDemand product."

Siebel will pay UpShot $50 million in cash and potentially as much as $20 million if certain financial milestones are achieved. UpShot has 100 employees and 1,000 customers, far less than the industry leader Salesforce.com, which has close to 8,000 CRM customers in the small- and medium-sized (SMB) business market.

NetSuite CEO Zach Nelson said he thought the $50 million seemed like a low price. "Based on any sort of valuation, they were a much smaller company than I thought. We are definitely are No. 2 in the Web-based CRM market." Nelson said he estimated based on the purchase price that Upshot's annual revenue was probably in the $10 million range.

Nelson also said he didn't think the timing made much sense, given that IBM and Siebel had just announced an agreement to offer CRM on demand. "Upshot doesn't run on IBM infrastructure, so Upshot customers must be wondering. They'll need reassurance."

Salesnet's Doyle offered his theory that Siebel was using the UpShot acquisition as a quick way to acquire customers. "Tom Siebel appears to be Larry Ellison's 'mini me' as Siebel is following Oracle's strategy of acquiring for increased market share in order to survive," Doyle said. "Today marks a big day for the hosted CRM market as Siebel is publicly validating that in order to enter into this industry, client/server vendors will need help, and only so many players can exist independently."

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