Partners No More

The two companies apparently finalized the decision within the past two weeks, according to sources in the channel. The split could force resource-constrained solution providers to choose between the Microsoft and Siebel products or pay the freight for supporting both.

Terry Petrzelka, president of Tectura, a Tempe, Ariz.-based CRM solution provider, said he expects his company will continue to offer and support both vendors' products. "Every customer has different requirements, and as an integrator, we have to be able to handle them all," he said.

The relationship between the two companies predated Microsoft's acquisition of Great Plains last year for $1.1 billion. The bundled offering deal started in 1999 and expires the end of the year. Microsoft Business Solutions, which encompasses the old Great Plains lineup as well as the newly acquired Navision ERP applications, is being lead by Doug Burgum, former Great Plains CEO who is now the Microsoft executive leading the charge into business applications.

"This was a marriage of convenience that was no longer convenient," said Erin Kinikin, an analyst at Giga Information Group.

Indeed, both Microsoft and Siebel are prepping new CRM releases: Microsoft plans to deliver its next beta of MS-CRM to a few dozen partners later this month, with wider distribution planned in October. Siebel is poised to ship Siebel 7.5, which now offers support for WSDL, UDDI and SOAP Web services protocols.

Some analysts and solution providers said Microsoft's decision to offer its own low-end CRM application poisoned the well for future collaboration with Siebel. While MS-CRM serves small businesses, some observers expect Microsoft to push upstream into larger companies, which would put it in conflict with Siebel.

The end of the contract was positioned as amicable by both companies, which said they expect existing customers to opt for either the Siebel or the Microsoft offering based on their own company's size.

Microsoft customers tend to be smaller companies that buy through VARs, while Siebel customers are larger and buy direct or work with systems integrators, said Richard Reimer, director of Siebel MidMarket Products. But Reimer said there is no "hard and fast line."

Existing customers will have the option to continue with Siebel MidMarket Edition 7.0, available from Siebel via existing support contracts. And Microsoft Business Solutions will continue to support Great Plains Siebel Front Office 6.X, according to a Microsoft spokesman.

In addition, Microsoft plans to offer integration between versions 6.0 and 7.0 of both eEnterprise and Dynamics as well as Solomon 5.0 to Siebel MidMarket Edition.

One East Coast integrator said his company is more likely to concentrate on Microsoft and SalesLogix-type offerings because Siebel doesn't understand the SMB business. "They were trying to put an elephant into an ant suit," he said.