IBM, Siebel team on CRM software

As previously reported by CNET News.com, the two companies, which announced the global alliance at a joint press conference held in New York earlier today, said they will integrate Siebel's customer relationship management (CRM) applications with IBM's hardware, software, and services.

The agreement marks a major push by Siebel against its archrival Oracle in the fast-growing CRM space, a market that analysts at AMR Research have projected to reach $16.8 billion by 2003, with annual growth rate of about 50 percent over the next five years. Oracle, which has been aggressive in its vow to topple Siebel from the No. 1 spot, announced a similar partnership agreement with computer maker Hewlett-Packard last month.

"This is a counterattack against the Oracle, HP relationship," said Judy Hodges, an industry analyst at International Data Corporation (IDC). "Although Siebel themselves might not have recognized it as such and this [agreement] could have been underway before HP and Oracle joined hands. Still, it's another blockbuster out of Siebel in terms of strategic relationships."

The CRM market has gained recent attention by major industry players, such as telecommunications company Nortel Networks and business software maker PeopleSoft. Last week, Nortel acquired front office software maker Clarify for $2.1 billion. Earlier this month, PeopleSoft and Vantive merged in a stock-for-stock deal worth $433 million. Both Clarify, Vantive, and others compete against Oracle and Siebel in the market for software intended to automate a company's sales, marketing, and customer needs.

"The CRM market is one where there are high strategic stakes," said Hodges. "IBM has already built a global prestige. This relationship really helps Siebel establish worldwide dominance."

Hodges added, "We see this [front office] market as really going through significant merger, acquisition activity, but also very strong partnerships, especially between application suppliers, with hardware vendors, and systems integration partners overall."

Under today's agreement, IBM and Siebel said they will jointly market and sell Siebel's CRM applications, which already fully support IBM databases and servers. The two companies have agreed to a joint distribution strategy that includes selling the combined applications and services on a global level. Initially, they said they plan to target customers in the finance, insurance, communications, and consumer goods industries.

In addition, IBM Global Services, the company's computer services arm, said it has formed a team within its CRM business trained on Siebel's CRM applications to deliver software configuration, integration, training, and customer support for its Siebel applications.

"It's considerably important for IBM because IBM and other hardware vendors were slow to exploit the market for ERP, but they have no intentions to let the CRM market escape them," said Hodges. The market for ERP, or enterprise resource planning software, is software that automates a company's back office which houses the financials, human resources, or manufacturing needs.

And for Siebel she added that "this means so many more feet on the street" in terms of a much larger sales force.

The agreement is a major expansion to existing partnerships between the two companies. In August, IBM Global Services unit said it would deliver support services for Siebel products. In Apirl, the two companies formed a pact to deliver "out-of-box" integration between IBM's DB2 database and Siebel's applications, a move intended to lure Siebel's customers away from Oracle's database

To promote the new integrated services, both companies said they've agreed to a "large-scale" comarketing program, which includes joint advertising and joint participation in several CRM industry events.