Siebel-Microsoft Deal Makes Sense

The strategic alliance between Siebel and Microsoft has been called (by Tom Siebel) one of the largest in computing history. Microsoft is a Siebel customer. Siebels backing of .Net is a huge vote of confidence for Microsofts architecture. The Siebel-Microsoft alliance also comes at a critical time in the industry, when IT purchases have stagnated and the war between Java and .Net is just getting started.

But the relationship isnt perfect. Its nonexclusive, and Siebel can and will develop just as much on J2EE as .Net. Microsoft is kick-starting CRM initiatives that eventually will compete on at least some levels just when Siebels midmarket strategy is taking off.

It is a far more rational deal than some pre-announcement rumors indicated. Some pundits speculated that because Bill Gates was doing a joint keynote address with Siebel, surely it pointed to an equity investment by Microsoft or—egad!—a full purchase.

Ultimately, however, the alliance is important because its about how software can be built with integration in mind. Tom Siebel actually scolded the software industry for letting its customers down. Vendors, including Siebel, built too much complexity into applications, there were too many applications and it wasnt possible to integrate applications.

Now Siebel is unveiling its Universal Application Network, which is not entirely universal. Separately, Siebel is at work to simplify the user interface. The goal is to reduce the costs that corporations incur to implement Siebel software, although Siebel will not reduce the cost of software licenses.

UAN is a bet-the-company product. When Tom Siebel recently said CRM was dead and integration was the future, he was serious. On the other hand, Siebel has shown slides showing that CRM is the second-most-sought-after technology, right after security.

Clearly, without the ability to tightly and easily integrate applications, however, CRM would be dead. As it stands now, UAN is fairly limited—its too small to affect an industry. The Microsoft deal helps a little here: UAN will work with Microsofts BizTalk and use the same Web services standards that everyone else is using. Generally, however, its really tough to sell Web services—you need the application. Siebels got one. Can it stave off competitors once everyones integrated?

Is Siebel on the right path? Write to me at john_taschek@ziffdavis.com.