Microsoft, Siebel call it quits on reseller deal

Microsoft Corp. and Siebel Systems Inc. will end their reseller agreement for Siebel's mid-market CRM product at the end of this year as Microsoft prepares to roll out its own CRM software aimed at small and midsize companies.

The 3-year-old Siebel agreement, which Microsoft inherited when it bought subsidiary Great Plains Software Inc. in December 2000, will be allowed to expire at the end of 2002 with both companies continuing to support existing customers. The reseller agreement ends as the companies find themselves focusing on different segments of the mid-market and different selling mechanisms, said George Ahn, general manager for Siebel sales and mid-market.

While Siebel targets the traditional mid-market enterprises, Microsoft will be going after more tactical, smaller companies with its new CRM offering due in the next few months, Ahn said.

"We have been very successful in the middle market with our customers, and it is through direct sales," he said. "Microsoft wants to sell through their VAR channel. Obviously, the Microsoft technology is going to be only Microsoft-centric, [and] we offer multiple platform support."

Letting the reseller agreement expire marks the end of a relationship that wasn't a good fit from the beginning, said Erin Kinikin, an analyst at Giga Information Group Inc. in Cambridge, Mass.

"Great Plains sells only through resellers [and] they sell only to small companies," Kinikin said. "Siebel is all about selling direct ... and providing a lot of functionality. Siebel wants to own the accounts. What the mid-market and small companies want is one system, one architecture from one vendor. No amount of partnerships are going to solve that problem for Siebel."

However, the news of Siebel ending another partnership with an ERP vendor could prove challenging for the company, Kinikin added. J.D. Edwards last year bought a CRM company to integrate CRM software into its own ERP suite after ending an earlier reseller agreement with Siebel.

In addition, resellers are critical in the mid-market, Kinikin added, saying that it will be critical for Siebel to maintain relationships with key resellers in the mid-market.

"It is a key measuring stick for Siebel to see if they can keep these partners or if, when Microsoft CRM comes out, Microsoft will roll over these partnerships," she said. "The real test is going to be 12 to 18 months from now when Microsoft CRM is in Version 2. Then the Microsoft resellers are going to take a hard look at Siebel. Siebel has to demonstrate that they can drive business for their partners. We know Microsoft can."

Indeed, the jury is still out on whether vendors like Microsoft Great Plains with ERP roots will overpower pure customer-facing vendors like Siebel because of easier back-end integration, said Cheryl Kingstone, an analyst at Yankee Group in Boston.

"Historically, a lot of customers have already bought accounting packages," she said.

"Microsoft is going to have success selling to that customer base. In the end, Siebel doesn't have that ERP slant," Kingstone said.

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