Siebel Systems Inc. jumped into the e-billing and self-service game in a big way this morning with the acquisition of Edocs Inc. for $115 million in cash.
The deal is expected to close in the first quarter of next year.
"This acquisition is fully aligned with our growth strategy," said Mike Lawrie, CEO of San Mateo, Calif.-based Siebel. "Going forward we believe companies will focus their investments on the front office which provides the greatest leverage for growth and competitive differentiation."
Natick, Mass.-based Edocs provides technology for online bill payment and customer self-service account management, driving customers from expensive calls into the call center onto online channels. The company has roughly 180 employees and 110 large customers, including firms like Sprint and Verizon.
"That's a pretty smart move," said Allen Bonde, president and founder of the Allen Bonde Group Inc. in Framingham, Mass. "This is the kind of deal I've been expecting Siebel to make for a long time but they never pulled the trigger. Edocs is really in the traditional market that Siebel has targeted."
Edocs customers are primarily companies in the Telcom industry, credit card divisions of large financial services organizations and in health care. Today's announcement stands in stark contrast to Siebel's announcement earlier this month that it is targeting the small and medium-sized business market.
This is Siebel's first acquisition under the leadership of Lawrie who is intent on extending Siebel's reach into the front office and its vertical offerings.
Siebel will benefit most from Edocs e-billing functionality, Bonde said.
"They've had some online account management and a sales configurator," he said. "They didn't really have the heavy duty e-billing and customer self-service functionality that Edocs has."
The market for e-billing and self-service is large and growing, earning $3 billion this year, according to Kevin Laracey, president and CEO of Edocs. Stamford, Conn.-based Gartner Inc. predicts that the number of people paying bills online will grow from 35 million now to 65 million in 2007.
"The benefits of doing this are significant and immediate," Laracey said. "Companies that leverage the Web channel for self-service are realizing dramatic cost savings."
Siebel will integrate all of Edocs into its organization including its service, field sales and engineering departments once the deal closes, Lawrie said. The technology of the two companies is also compatible.
"We see the technological direction of Edocs and Siebel are well aligned," said David Schmaier, executive vice president at Siebel. "Our customers are asking for open systems and industry standard platforms. Edocs has built on a highly scalable applications-based architecture on J2EE. Some of their [Web] sites are some of the largest J2EE in the world."
Product integration will continue over time as the companies combine one data model and one business model, Schmaier said. Initially, Siebel will target communications, financial services, health care and the energy industries with the integrated application.
Shareholders of privately-held Edocs may also receive additional payments in 2006 based on revenue and other contractual milestones.
Editorial director Jon Panker contributed to this report.