Siebel's Oracle union may end its IBM OnDemand alliance

Oracle's agreement to buy Siebel immediately raised questions about the future of Siebel's CRM OnDemand service - a venture in which Oracle rival IBM is deeply involved. Executives from both Siebel and Oracle say the hosted customer relationship management service will go forward. Nevertheless, a close look at the vendors' relationships suggests that IBM is likely to be left out of Siebel's OnDemand future..

Siebel is the highest profile partner in IBM's "Software as Services" program, a network of ISVs that offer their applications as hosted services managed by IBM. When Siebel CRM OnDemand launched two years ago, Siebel and IBM characterized it as a joint venture, developed and marketed jointly by the two companies. Now Siebel is casting IBM as a partner of convenience that can be abandoned without any customer disruption.

"Siebel CRM OnDemand was built on Siebel 7.5.2, and the fact is that that product line runs on any database and any application server," said Bruce Cleveland, Siebel's senior vice president of products. "We created a partnership with IBM and we chose for that partnership, for obvious reasons, to run it on WebSphere and DB2. There is no technical linkage. We can make a different decision going forward if we choose."

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Oracle's agreement to buy Siebel immediately raised questions about the future of Siebel's CRM OnDemand service - a venture in which Oracle rival IBM is deeply involved. Executives from both Siebel and Oracle say the hosted customer relationship management service will go forward. Nevertheless, a close look at the vendors' relationships suggests that IBM is likely to be left out of Siebel's OnDemand future..

Siebel is the highest profile partner in IBM's "Software as Services" program, a network of ISVs that offer their applications as hosted services managed by IBM. When Siebel CRM OnDemand launched two years ago, Siebel and IBM characterized it as a joint venture, developed and marketed jointly by the two companies. Now Siebel is casting IBM as a partner of convenience that can be abandoned without any customer disruption.

"Siebel CRM OnDemand was built on Siebel 7.5.2, and the fact is that that product line runs on any database and any application server," said Bruce Cleveland, Siebel's senior vice president of products. "We created a partnership with IBM and we chose for that partnership, for obvious reasons, to run it on WebSphere and DB2. There is no technical linkage. We can make a different decision going forward if we choose."

IBM did not have any executives available for immediate comment. An IBM spokesman said the company plans to continue supporting its joint customers with Siebel.

Oracle executives also were unavailable for comment, although they emphasized their commitment to Siebel's hosted offering in conference calls Monday with analysts. Oracle CEO Larry Ellison called Siebel's CRM OnDemand "a key motivator" for the acquisition.

"We think OnDemand is going to be increasingly important. We think the Siebel OnDemand products [are] improving at a very, very rapid rate, and we intend to invest in them heavily," Ellison said. "We expect that all of the Siebel product features and functions that they have in the software products will migrate to the OnDemand products. So we think that is, again, a very important asset that we want to preserve and invest in as this acquisition is concluded."

Siebel's competitors -- most notably Salesforce.com, whose annual user conference was upstaged Monday by news of the Siebel/Oracle union -- are eager to portray the impending Oracle takeover as a disaster for Siebel's OnDemand customers. Six-year-old Salesforce.com has 308,000 subscribers for its CRM service, while Siebel's newer hosted software venture ended last quarter just shy of 40,000 users.

Salesforce.com CEO Marc Benioff projected imminent death for the service. "Siebel on Demand, a joint venture between Siebel and IBM, will be the first to be buried," he wrote Monday in an e-mail message to Salesforce.com employees that was also released to the media. "Siebel on Demand is written exclusively on DB2 and Websphere and runs in IBM data centers. Oracle will kill it. Oracle does not sell DB2."

Some analysts shared that view. SG Cowen & Co. analyst Peter Goldmacher called Oracle's Siebel takeover "a dream come true for Salesforce.com"; he forecast in a research note that the deal will lead to turmoil in Siebel's sales organization and prompt a number of its top sellers to look elsewhere for work.

The IDG News Service is a Network World affiliate.