Is Siebel the first giant to be toppled by the rise of SaaS?

8th May 2012

Over the past week or so there has been some debate about IBM’s decision to migrate from Siebel to SugarCRM.

The reason is that this is the most recent in a series of enterprise tech sector defections from Siebel, namely HP moving to and Microsoft moving to Dynamics CRM. Could it be that Siebel is going to be the first major victim of the shift to more Web native business applications?

It is reported that IBM chose to move to SugarCRM because it found the open source nature of SugarCRM compelling, it liked the user interface look and feel (and Siebel is suffering much customer unhappiness with its web UI dependency on an ActiveX control) and also welcomed an application that could be run on premise as well as in Cloud delivery mode. All of these reasons are plausible, but it is probably also true that the ability to integrate well with Lotus Notes, IBM DB2, Cognos and SPSS helped tremendously as well. And why was SugarCRM such a tight integration fit with these IBM technologies? Because it is an IBM Global Alliance Partner, which is building a sustainable business around this relationship, especially amongst Lotus Notes customers.
Of course, one thing IBM, HP and Microsoft all share is market competition with Oracle, and each became a Siebel customer before the software was acquired by Oracle in 2005. So, it could simply be that the natural refresh cycle has been reached in each of these organisations and the obvious chance to score marketing points by ditching an Oracle product could not be missed by any one of them.
However, those of us with no vested market interest in having a pop at Oracle know that CRM solutions by and SugarCRM, are Web native with better designed user interfaces, better social media integration and can now also clearly scale. Furthermore, while open source solution providers such as SugarCRM might have been penalised by enterprise customers in the past for lacking a roadmap, if you are a Siebel customer you will be used to frustration regarding the development of Oracle CRM Fusion and planned release dates. With more faith in Father Christmas than in Oracle’s Siebel timeline, should a Siebel customer continue to invest, wait or move to another more modern CRM solution? While you mull the decision, Siebel skills are becoming scarcer, which means they are becoming expensive, and probably signals Siebel’s official entry into the world of legacy systems.
Of course many large enterprises continue to use Siebel, including GEC and BT, so the software that defined the CRM market in the 1990s is still breathing, but if Oracle doesn’t get its act together soon with Fusion CRM, Siebel will be in the software market equivalent of intensive care.
Whatever the truth may be regarding the wider market prognosis for Siebel, the IBM deal means that SugarCRM CEO Larry Augustin is one step closer to running a company viewed as a modern corporate software vendor with strong CRM functionality, rather than simply as an open source poster child. And that must give all Siebel customers food for thought.
Dr Katy Ring is principal analyst with K2 Advisory.

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