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Siebel Rallies Its Integration Alliance Troops Part 2: Market Impact

Written By: Predrag Jakovljevic
Published On: May 13 2002

Event Summary

On April 8, Siebel Systems, Inc. (NASDAQ: SEBL), the leading provider of customer-centric eBusiness applications software announced its intention to release a set of application integration tools in the second half of 2002. The new products intend make it easier for organizations to exchange data between Siebel's CRM system its other vendors' business applications. A standards-based and vendor-independent application integration solution called Universal Application Network (UNA) is touted to dramatically reduce the need for custom integration, thereby minimizing complexity, speeding deployment and delivering a low total cost of ownership (TCO). Leading system integrators such as Cap Gemini Ernst & Young, Accenture, IBM Global Services and KPMG Consulting, and application integration server vendors including IBM, SeeBeyond, TIBCO Software, Vitria, and webMethods, have all committed technology and expertise to deliver the Universal Application Network. The most recent to join in was BMC Software on April 22.

Siebel Systems believes it is positioned well to deliver this solution through its open architecture, industry specific domain expertise and extensive partner ecosystem

This is Part 2 of a 2-part analysis of recent Siebel Systems' product announcements.
 
For details on the announcement see Part 1.

Increasing Competition

The era of Siebel's uncontested supremacy in the CRM market seems to be nearing the end, also owing to both Tier 1 ERP vendors intrusion of the CRM space and to some mid-market CRM vendors coming of age. Although Siebel's moves towards delivering industry templates and the solutions for mid-market are commendable, not much will change until the company breaks its suite into more digestible components and delivers simplifying implementation and customization tools.

Customers will increasingly opt for competitors' products that may have less functionality, but are much more implementation and customization friendly, and possibly offer tightly integrated solution. The recent fallout with J.D. Edwards (see J.D. Edwards Fires Siebel, Hires YOU), as well as Microsoft's delivery of its own CRM product (see Microsoft Throws .NET At SMEs, With CRM As Bait) and Microsoft's polygamy with CRM mid-market stalwarts Onyx and Pivotal are some examples. Moreover, some mid-market ERP vendors already offer a sound CRM offering (e.g., Best Software, Epicor Software, Infinium), many current Siebel ERP partners are increasingly delivering their CRM capabilities (e.g., Navision, Microsoft Great Plains), while many smaller ERP vendors without a CRM offering will rather opt for an alliance with the likes of Interact Commerce or FrontRange, or will pursue a delivery of their own CRM components (see Mid-Market ERP Vendors Doing CRM & SCM In A DIY Fashion).

In the current economic climate, Siebel's CRM-centric functionality bells-and-whistles and an adequate Web-enabled product architecture may look ever less compelling even to the higher-end of the market, as enterprises with heavy ERP investments from ERP leaders-turned CRM wannabes might settle for likely less powerful CRM offering of those, in exchange for the potential long-term benefits of extended enterprise applications integration and subsequently lower TCO (see Integration is the Name of the Game in Software Systems).

The fact is also that the CRM functionality offered by ERP leaders will not necessarily be inferior in every case either. As an example, if the importance of order management and content management in a user's business strategy is great, one should not be terribly surprised if SAP or any other traditional ERP vendor outscores Siebel in the enterprise applications selection. This has long begged the question when Siebel would move beyond fancy order capturing, contact management, and/or call center, and take on the user's entire order management process. Siebel has indeed traditionally shown a little support for transactional and order fulfillment capabilities, whereas many ERP vendors can offer the support for each stage of the customer life cycle - engage, transact, fulfill, and service afterwards. In any case, each of these is a critical customer-facing process, and Siebel seems to have excelled only at the first and the last. As the Siebel 7 opportunity to deliver these was missed, time will only tell whether the Siebel 7.5 will deliver these sooner than its opponents will catch up within their sub-optimal areas.

Nevertheless, Siebel's idea of its Universal Application Network seems innovative and should help the needs of the higher-end of the market, whose paramount concern have been the enormous costs of integration and the general lack of responsiveness by enterprise application vendors to address this issue. Siebel's embracement of standards-based Web services as a technology enabler may appeal to customers that are keen on preempting dependencies on proprietary Application Programming Interfaces (APIs). Although Siebel is not the only one to go in this direction given J.D. Edwards' OneWorld eXternal Process Integration (XPI) "middleware-in-the-box" approach and SAP's recent subscription to Web services and business process integration (see SAP Opens The 'Miss Congeniality' Contest), Siebel might be going a step ahead by gaining the endorsement of several prominent enterprise application integration (EAI) suppliers and systems integrators (SI) for an initiative to standardize EAI.

Although integration servers may reduce that complexity to a degree because all the applications plug into a central hub, the EAI servers themselves tend to be proprietary and non-standard. The customers are increasingly desiring to do away with point-to-point integration approaches at that data level (with extensive lists of custom APIs and connectors/adapters) and to replace it with more inter-enterprise ranging integrations, based on business processes that extend beyond the traditional definitional boundaries of a single application suite.

Therefore, Siebel's strive for standards-based business processes to plug into industry-standard servers, may raise the least common denominator of interoperability. Siebel had no better option to pursue though given the lack of its own back-office offering and its adoption by a diverse population of ERP users. This is also the chance for these EAI vendors to devise an answer to SAP's business process level of integration and modeling (via SAP new tools like Solution Maps, C-Business Maps, and Solution Composer), in addition to their offerings' immaculate transactional performance. Furthermore, the move will help Siebel open and/or componentize its product, as standards like eXtensible Markup Language (XML) and eXtensible Stylesheet Language (XSL) make it possible to share data and have a common look-and-feel across an application, without necessarily digging in the source code. Provided that, Siebel could incrementally (module by module) penetrate and possibly grow to a major presence in accounts where it currently has none. Conversely, its leverage in current accounts may wear away module by module, as the customer's ERP provider comes up with an equivalent CRM functionality.

Challenges

Siebel's UAI approach will not happen easily and quickly, notwithstanding. One issue will be whether Siebel will convince customers to rely on it for extended enterprise business processes integration, given Tier 1 ERP vendors' strides in that regard. This challenge may not be that insurmountable given Siebel's sweet spot of extending customer-centric business processes within Siebel's industries of focus (e.g., energy, financial services).

Another obvious challenge is a mere volume of the imminent work that is ahead of Siebel and its partners to offer almost 'out-of-the-box' integrated functionality in shape of a pre-built library of business processes. Now, at least by the above mind boggling announcement and description of UAI, it may be clearer how complex CRM integration is so that a client can obtain an enterprise wide view of customers and share it accurately across all channels and divisions. One should imagine how humongous the job of delivering plug-and-play packaged middleware components for a number of disparate applications will be.

Yet another challenge will be in managing relationships with each integration provider. To that end, Siebel should promptly articulate how, e.g., problem reporting and escalation will work and who will be in charge/owner of which part of the solution. Given a number of conceited competing vendors in case, one should expect a contest for the most favored integration partner in this arrangement. In order to diffuse consternation and vendors' attempts to embed their proprietary technology as to create dependency on their product (which would defeat the purpose of touted universality), Siebel might want to select a preferred provider for certain industry or a certain product line. A good example would be Siebel's announcement that webMethods is the preferred real-time integration provider for its Partner Relationship Management (PRM) product line and that TIBCO will have a similar treatment for financial services and energy segment.

Summary

As a summary, Siebel should be pleased with the support from the EAI and SI industry leaders, and if it can manage and execute these properly, the company might leverage each partnership to meet particular technology and industry requirements. Should its superior CRM functionality come together with an embedded integration to incumbent enterprise applications, it might be a compelling value proposition to the markets that have been inaccessible to Siebel so far.

User Recommendations

This is by all means good news for enterprises that need to integrate their heterogeneous internal business applications with applications from other vendors and/or who need to exchange information with their business partners. While Siebel's new UAI blueprint is impressive, the market has often in the past witnessed how long the road is between the vision and execution, Siebel's huge resources notwithstanding. Given the steep change to Siebel 7 product architecture and more expected changes to upcoming Siebel 7.5, current Siebel customers would be best off to apply the wait-and-see approach, unless newly released functionality will positively contribute to their business strategy (through, e.g., strong vertical industry offering).

Customers in the middle of an older Siebel release implementation should stay on course, unless current project scope expands beyond the timeframe the product will be supported. However, client-side customizations should be brought to the absolute necessary minimum as to assist in the eventual upgrade to the new Siebel 7 architecture.

On a more general note, as leading applications vendors have been reaching parity across many CRM areas, new users should base their software purchase decisions on many other criteria like impending EAI costs, product usability, product architecture, and Total Cost of Ownership (TCO). Given vendors' zeal for new license revenue, do avail yourself of vendors' assistance in identifying return on investment (ROI) in the concrete case, in application customization for vertical industries, and in integration to your legacy applications. Also, insist on "scripted business scenarios demonstrations" or "conference room pilots," or even on the opportunity to conduct extensive system tests within your environment. Although the widespread acceptance of Web services deployment is only in its nascence, large global enterprises should still start learning the new protocols, standards and technologies in order to grasp the potential business advantage.

This concludes Part 2 of a 2-part analysis of recent Siebel Systems' product announcements.
 
For details on the announcement see Part 1.

 
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