Siebel takes on hosted CRM

CRM heavyweight Siebel Systems is prepared to once again dive into the hosted applications market, this time in partnership with longtime ally IBM.

The two companies have sealed a deal to offer a $70 per-user, per-month service, making Siebel the first enterprise CRM vendor to bring out a subscription-based product that competes  against the growing ranks of CRM ASPs.

Dubbed Siebel CRM OnDemand, the service is set for a fourth-quarter launch. The news comes on the eve of Siebel User Week 2003. Small and midsize businesses are the main intended audience for the service, but Siebel also hopes to entice larger businesses to use it for expanding CRM deployments. Siebel CRM OnDemand has a custom architecture and user interface, and will integrate with Siebel’s traditional software.

Offering an upgrade path option gives Siebel an advantage, analysts said. 

“What the other ASPs don’t offer is a growth path into a robust enterprise product,” said Liz Roche, an analyst at Meta Group.

Roche expects the CRM ASPs to feel the pressure from Siebel.

“I do think that this will cut into the sales-focused ASP market,” Roche said. “Given the depth of Siebel’s product, it will compete effectively with them.”

 Some users may be drawn to the breadth promised by an enterprise software vendor. For example, one Salesforce.com user is currently testing Seibel’s forthcoming hosted offering, and is considering switching.

Chris Stauber, CTO and vice president of engineering at Planitax, a tax software provider, said he is interested in Siebel’s comprehensive functionality.

“Some things I was looking for were client support capabilities, analytics, and the ability to dig a little deeper into more sophisticated functionality that relies on a comprehensive data model,” Stauber said.

“I wouldn’t say Salesforce.com doesn’t go there,” Stauber added. But, “What I see in the early [Siebel OnDemand] product has top-of-the-line analytics that Siebel enterprise has. It has comprehensive opportunity management that does things that other offerings don’t.”

Siebel was an early competitor in the CRM-as-a-service market, launching Sales.com in 1999 to offer browser-based sales tools. Two unprofitable years later, the venture was scrapped. Since then, a pack of independent vendors has carved out a niche, offering access to some of the functionality traditionally found in enterprise applications without the implementation hassles and high price tags.

Siebel isn’t worried about competing with the CRM ASPs, said Richard Gorman, Siebel’s senior vice president of products.

“There’s a couple of smaller startups in this space, but it’s 99.99 percent untapped territory,” Gorman said.

One of those “smaller startups” is Salesforce.com,  which claims 100,000 end-users for its CRM service and says it will hit $100 million in revenue for this year.

“Siebel’s business has gone to hell in a handbasket over the last three years. They’ve had an uncontrolled, precipitous decline in revenue, mostly because their product is too complex, too hard to use, and too expensive,” said Marc Benioff, CEO of Salesforce.com.

Customers are demanding more flexible and less expensive deployment options, said analyst Denis Pombriant, CRM research director at Aberdeen Group.

“We’re not going to see the market completely convert over to hosted applications. There are good reasons why companies will continue to buy licenses and host applications in-house. One of the things Siebel brings to this party is this understanding, and a credible offering for both camps, with an innate integration of the two,” Pombriant said.