Siebel Acquires UpShot and Motiva

Siebel Systems went on a buying spree this week, picking up two companies that could help the CRM leader stake its claim in two distinct, burgeoning markets. Siebel has signed a definitive agreement to acquire UpShot, an online CRM provider, as well as business-applications maker Motiva, which focuses on software to track performance-based employee compensation. Under the terms of the cash deals, Siebel will pay $70 million in cash for Upshot, and pay under $3 million for the assets of Motiva. Siebel Systems' acquisition of UpShot is currently expected to close by early November. Speaking during an earnings conference call with analysts on Wednesday, CEO Tom Siebel said the company's motive 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 its target market. The privately held UpShot has approximately 100 workers, most of which are expected to be hired by Siebel. The plan is to eventually merge the UpShot service with the still-in-development CRM OnDemand service, according to David Schmaier, an executive vice president at Siebel. CRM OnDemand, Siebel's hosted-CRM solution, is slated to launch by the end of the year. Siebel officials say they expect the market for hosted CRM applications to hit more than $2.7 billion by 2006. UpShot CEO Robert Reid, along with UpShot founder and chairman, Keith Raffel, will lead the merger of the UpShot workforce with Siebel's CRM OnDemand division. Reid will be general manager of the division. Raffel is also expected to stay on. "We are doubling down on CRM," Siebel said in a prepared statement. "The UpShot acquisition advances our strategy of CRM for Everyone, our commitment to provide CRM solutions for every segment of the market, every type of organization, and every type of user." Siebel plans to provide prebuilt integration for both Siebel CRM OnDemand and UpShot's CRM solutions to Siebel on-premise enterprise applications. This will give customers the choice of running their CRM system in a traditional environment or hosted environment. The purchase of Motiva will help Siebel enter the compensation market. 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. Over time Siebel CRM OnDemand and UpShot's products will be combined into a single offering. UpShot customers who elect to continue using the existing UpShot product will receive support indefinitely. Steve Bonadio, an analyst at the Meta Group, says the acquisition gives Siebel immediate credibility in the market, along with people experienced at selling in the hosted space. "It requires a different sell and a different set of skills, and UpShot understands the business," Bonadio says. "Plus, UpShot is very Microsoft-centric and has already built connections to Microsoft products, which is where Siebel has said it wants to go with Siebel 7.7." Sheryl Kingstone, CRM program manager at the Yankee Group, says the key issue is going to be integrating functionalities between the two products. "Upshot is .NET based and Siebel is based on IBM's WebSphere. While it's not impossible, it needs to be done effectively," she says. Because of the public--and often very heated--battle that rival Salesforce.com has waged against Siebel, it's natural that Siebel did not approach the company as an acquisition target, according to Bonadio. "Salesforce is considered the market leader in the CRM software--as-a-service model, but Siebel couldn't go after them," he says. "Besides, I think Marc Benioff (Salesforce's founder, chairman, and CEO) would rather give up a limb than talk merger with Siebel." Siebel has never approached Benioff, who thinks the deal just makes it easier for customers to choose. "They can choose Siebel, an unproven provider of CRM OnDemand who has killed the UpShot product line in favor of their in house offering, or they can choose the global leader in on demand solutions, salesforce.com." Benioff says, adding that Salesforce.com will be offering UpShot customers a migration plan to their product. Raffle says he is delighted with the deal and that it's a good fit for the two companies: "They did have the people or a product in the market, and needed expertise and product knowledge. We are a small company that has a good product, but not the resources of infrastructure to really compete."