IBM’s Siebel defection signifies CRM changes beyond Oracle

An enterprise ditching its old CRM system for another vendor is rarely dramatic news for the wider business world. But IBM’s decision to retire its Siebel system in favour of SugarCRM was noteworthy. This was, after all, the largest Siebel implementation in the world – a 67,000-seat global implementation running sales, marketing and CRM, that pre-dated Oracle’s $5.8bn acquisition of Siebel in 2005.

It was also notable for another reason, with IBM’s move having followed a couple of other recent significant Siebel defections – Microsoft weaning itself off of Siebel in favour of its own Dynamics CRM, and Hewlett-Packard swapping to Salesforce.com.

The bigger picture points to a drawing of battle lines amongst the software giants – “We have a very big war starting with the behemoths of the software industry,” notes Mike Davis, senior analyst at Ovum. “There’s a lot going on here that is bigger than just ditching Siebel. It is very much about the four big players each setting out their own territories.”

But nonetheless, in the CRM world the response to IBM’s move has not made for easy reading for Oracle.

“While Oracle can dismiss IBM’s move away from Siebel as the antics of a competitor looking to score marketing points, it is symptomatic of wider unease amongst Siebel customers who are frustrated with the software’s ‘vintage’ web user interface and lack of a clear roadmap into Fusion CRM,” said Dr Katy Ring, director of K2 Advisory.

“Customers are deciding whether to continue to invest, wait or move to a different CRM system. IBM took the decision to move and in the process has catapulted its Global Alliance Partner, SugarCRM, into the world of enterprise RFPs. We expect more of those RFPs to come to market from Siebel customers this year.”

Not good news for Siebel, certainly. But a day to celebrate for SugarCRM, which can claim that it has not only scored points off of the incumbent CRM provider, but also the other providers in waiting, including Salesforce.com. Certainly its open source nature will have provided significant appeal to IBM – “IBM has always been a major supporter of open source software,” says Davis, “you can go back to 2004 when it was supporting both Red Hat and SUSE Linux.” But it still remains a significant coup.

Paulo Santos refers to the deal as “a true earthquake in the Cloud CRM sector”.

He comments: “What does one think will happen now, competitively, when SugarCRM is on the table as a competitor with Salesforce.com? Previously, you had this huge well-known Cloud leader in one corner, Salesforce.com. In the other corner, the contender was this frail, unknown, open-source cheapo, SugarCRM. Not so any more. Now SugarCRM will present itself as the CRM that runs IBM, and the credibility gap is gone.”

And the Siebel defections also demonstrate to a wider trend in the CRM sector, according to Clive Longbottom, founder of Quocirca.

“We are seeing a move away from the incumbent enterprise application vendors across the board - this is not just a Siebel issue, but also a lot of the rest of Oracle applications, as well as SAP. These older style, multi-level apps are all suited to a more mobile employee base, and are not flexible enough to respond to market needs at the speed the business is now demanding. Also, the costs of maintaining hardware, as well as the software stack is getting too much for many, and a SaaS solution often makes more sense to them (e.g. Salesforce.com or a managed hosted version of SugarCRM). Even where the business still feels it needs to have ownership - more often of the data than the app - then something like an on-premise version of SugarCRM gets rid of licence and maintenance costs - but does introduce support needs, which often have robe paid for.

“These newer entrants to the market are also seen as being more flexible, putting the business back in control of what it does around CRM, rather than the business perceiving that it really needs to change how it carries out its processes to meet the rather old ‘best practices’ that tend to dictate how CRM processes a operated under Siebel or other similar packages.”

But there will be no time for SugarCRM to rest on its laurels. As Carter Lusher, research fellow and chief analyst, software and enterprise solutions at Ovum, notes: “Becoming the core of IBM’s new internal CRM platform is a huge win and challenge for SugarCRM. Because the new CRM will be rolled out to tens of thousands of users worldwide it means gaining validation as ‘large-enterprise-ready’. Naturally, this is a major deal that will add to SugarCRM’s top line.

“The challenges for SugarCRM are that it takes the IBM partnership to a much higher level with significantly more at stake. It’s a huge deal that raises the expectations of investors. Tens of thousands of deployments, even over years, will be complex, and SugarCRM will be receiving much deeper scrutiny from skeptical and experienced IT and business professionals at large enterprises and public sector organisations.”

Furthermore, with CRM being a multi-billion dollar market, competition is always going to be aggressive – and all the vendors should be looking over their shoulders for fresh threats.

Longbottom concludes: “The long game should be for the business processes to be facilitated dynamically by pulling functions together via the Cloud to create a ‘composite application’ - this is where the competition for Salesforce.com and SugarCRM will come from, as Cloud service providers move to create highly flexible services that meet the needs of a business at a specific moment - rather than trying to host a singular app that tries to be all things to all men.”