Sold to mid-market companies under the name Microsoft Great Plains Siebel Front Office, the bundle, which teamed Microsoft's Great Plains accounting package with Siebel's CRM software, will not be available after the end of 2002.

The deal with Siebel predates Microsoft's purchase of Great Plains Software more than 18 months ago for $1.1 billion. Following the acquisition, the developer became Microsoft Business Solutions group. The division, based in Fargo, North Dakota, comprises the Great Plains accounting offerings along with Microsoft's forthcoming CRM applications and its recently acquired accounting packages from Navision.

Richard Reimer, director of product marketing for Siebel says the decision to not extend the contract with Microsoft, which started in mid-1999, was "mutual and for the right business reasons."

Reimer says the best fit for Siebel is at the upper end of the mid-market, while Microsoft targets the middle and lower ends of that mid market spectrum.

"It was a good relationship, but through it we learned that the mid-market has multiple segments - an upper and a lower segment - and that the medium businesses at the upper end are larger businesses. They are global, have multiple divisions, tend to buy directly from the vendor and have complex environments that require systems integrators. That is the market where Siebel has done well."

Reimer says that Siebel decided that the partnership was "doing good business (450 customers) but not as good of a match as it could have been, so we it didn't require us to make further investment."

Since February, when Microsoft announced it would be entering the CRM space by the end of the year, there has been speculation as to how the software giant's current partnerships with CRM vendors would be impacted.

Microsoft officials vehemently denied any conflict and said Microsoft CRM would target the small to medium sized business market, leaving the higher end of the mid-market and the enterprise to its key partners including Siebel.

But industry watchers continued to speculate that Microsoft had intentions of eventually moving into Siebel's high-end territory. That reportedly strained the relationship between the two companies making negotiations over the last several months to extend the deal very tense, sources say.

Reimer says Microsoft's entry into the CRM space did not impact the decision to renew the contract.

Meanwhile, Siebel and Microsoft will ensure that users of the bundle will be supported by Microsoft. Users can also opt to contract directly with Siebel, according to Reimer.

IN addition, Microsoft's Great Plains division will work with solutions providers to develop and maintain a connector to Siebel from Great Plains back office offerings. Those developers will become Siebel partners as well, he says.

Microsoft could not be reached for comment by press time.