Siebel heads out on acquisition path

The San Mateo, Calif.-based company said Wednesday that it has agreed to acquire software-as-service company UpShot for up to $70 million in cash and has bought the assets of business applications maker Motiva for less than $3 million.

The UpShot buy should boost Siebel in hosted business applications, while the Motiva deal gives it an entry into the market for software that helps companies track performance-based employee compensation.

Siebel moved deeper into the hosted business applications market earlier this month, when it announced a pay-by-the-month software program, called Siebel CRM OnDemand, which is set to launch by the end of the year. OnDemand is a simplified version of Siebel's complex customer relationship management (CRM) applications, delivered over the Web via IBM Global Services.

Siebel will eventually merge the UpShot service with the still-in-development OnDemand service, David Schmaier, an executive vice president at the company, said Wednesday.

UpShot, based in Mountain View, Calif., employs about 100 workers, and Siebel expects to hire most of them, executives said. UpShot's customers include Hewlett-Packard and Xerox.

Siebel's rationale for acquiring UpShot is similar to acquisitions it's made in the past, which is, "within a very short time to establish a commanding lead" in the market segment it's targeting, CEO Tom Siebel said during an earnings teleconference. The move is likely to touch off a fierce rivalry with Salesforce.com, which claims that it dominates that niche.

Salesforce CEO Marc Benioff dismissed Siebel's move to buy UpShot. "We don't view them as a credible threat," he said. "They know how to shove big software licenses down big companies' throats."

Siebel expects the market for hosted CRM applications to surpass $2.7 billion over the next three years, making it the fastest-growing segment of the CRM software market.

Motiva, based in Pleasanton, Calif., specializes in business systems for tracking performance-based employee compensation such as bonuses and sales commissions. Its customers include Mellon Bank and Clorox, Schmaier said. Siebel rival PeopleSoft recently entered the market for this type of software. Siebel says the overall market is growing and will generate an estimated $100 million in sales this year.

Siebel plans to build technical links between the Motiva software and its other CRM components by the end of the year. The deal will have no material impact on its earnings, the San Mateo, Calif.-based software maker said.

It expects to complete the UpShot deal in November. Under the agreement, Siebel will pay $50 million in cash upon the close of the transaction and will pay up to an additional $20 million this year and next.