When Siebel Systems looked to strengthen its already dominant position in customer relationship management software, it carefully eyed its three main competitors: Scopus, Clarify and Vantive. Having carried out due diligence on all three, Siebel chose Scopus, in the belief that it had the similarities in terms of software architecture and a complementary vertical market focus. Siebel’s grand strategy is to take the best features of its own Service Enterprise SFA sales force automation-cum-marketing suite and combine these with the best on offer from Scopus’ customer service and field support Support Team product. Scopus’ technology crown jewels come from its roots as a multi-tier client-server application written in Smart Script, while Siebel’s product strengths are anchored in its marketing automation synchronization engine. Siebel plans to create an ambitious front-end application suite that will span customer service, technical support, service management, telemarketing, telesales, call center, help desk and customer service.
Smooth upgrade path
It will then target this so-called best-of-breed offering at the vertical markets it has already built in insurance, fast moving consumer goods and pharmaceuticals, in addition to those it stands to gain via Scopus in telecommunications and financials. At this stage in the acquisition cycle, Siebel will still be evaluating possible integration paths and time frames in which this can be reasonably achieved; the deal is not likely to complete until the end of the second quarter, and Siebel is wary of giving integration deadlines. However, the eventual goal is to build a common user interface across all products, have one data model underlying each of the application families, and develop a single tool for the creation/configuration of both applications. Siebel assured us that Scopus customers would see a smooth upgrade path to the new best-of-breed customer care suite and re-stated its commitment to Scopus Support Team by announcing that it would add new features and functions in another product release. Service Enterprise should also make it through another release, although Siebel would not commit to exactly when this will start shipping. In the short term, therefore, users of either suite are unlikely to see any radical changes to product development plans or support. Further out, when Siebel begins trying to migrate the respective installed bases to an integrated customer service solution, there are concerns over the affects on the existing users of Siebel Service Enterprise as Siebel transitions its installed base to a product borne out of Scopus’ line. As several customers have told us, Siebel can’t migrate Service Enterprise users to Scopus-derived product without de-coupling it from Sales Enterprise, since these products share a common data model. And if the two applications are split, then the much vaunted sales/service integration capabilities could be lost. This is a big issue. Service Enterprise is a key product for users of Siebel’s service, call centre and help desk software since it analyses customers, products and service records to reports any net change in customer service. It is difficult to ascertain just how many of Siebel’s 150-200 customers will be affected. But given its impressive customer list which includes the likes of Charles Schwab, Lucent Technologies, Andersen Consulting, Kelloggs, Nasdaq, Compaq and PeopleSoft, Siebel is clearly going to be cautious. Accepting customer concerns, Siebel maintains that the integration path for both sets of customers will be smooth, painless and totally complete by the end of next year. Given the integration issues which customers are already raising though, and the fact that Siebel did little more than three weeks of due diligence before cutting the deal, this deadline looks highly ambitious. The first stage, it says, will be to enable Siebel 98, the latest version of its customer service suite announced last week, to invoke Scopus’ Smart Script scripting environment. This will enable both applications to share the same components. Both sides are also working on the workflow management capabilities of the products so that the respective applications can interoperate at the event-level. Another early project is the development of real-time data exchange utilities to enable each product to have unrestricted access to the other’s object data. That Siebel struck this deal so quickly is indicative that it is keen to take advantage of its amazingly high valuation – $2.5bn – to makes a share purchase of the most financial weakened main rival, by offering $460m in a stock transaction for Scopus. Of course, the downside is that Siebel may not yet know just how complementary these two products are. And if does run into problems, it may have difficulties holding onto some of the 500 or so prestige accounts it has won – especially as the big enterprise players such as SAP, Baan and Oracle are now in a position also to start moving into this space. Siebel told us that the customers it has picked up from the acquisition, which include some highly prized big name sites such as AT&T, Wells Fargo, Ford, Fleet Bank and Boeing, represent a ripe cross-selling opportunity on which it will swiftly capitalise. To this end it will create one global sales force which will have the channel expertise for which Scopus is known, and the direct sales experience which has been its own strength. The cross-sales opportunity should be quite high given that 80-90% of Scopus accounts are in telecommunications and financials – verticals in which Siebel has never really had that much of a presence.
Huge market opportunity
Siebel is, naturally, talking up the deal as a huge market opportunity. It says it will now have 35% of the sales force automation market that is slated to be worth $6bn – $10bn this year. The customer care/help desk/sales force automation market is certainly becoming more crowded as front-line and back-office applications converge. This is no bad thing from a user perspective since it clearly increases the choice of products, and will inevitably lead to a lowering of entry price points and cut implementation costs. However, users should be wary of false promises. Siebel’s acquisition of Scopus could be one case in point. Meta Group expects API integration within three to six months but is predicting that data definition and model integration will not take place for another 18 or more months. Complete architecture integration will not occur for another 3 or so years. This may be a slightly exaggerated forecast, but it does illustrate that Siebel will have to be seen to be executing its integration strategy.
M&A Impact
