Siebel Takes a Hearty Gulp of the ASP Kool-Aid

When it comes to embracing a hosted CRM service, Siebel Systems has certainly gotten religion.

Siebel spent years denying that CRM application service providers represented a serious challenge to licensed CRM software sales. The company complained loud and long that CRM ASPs were peddling an inferior product that couldnt hold a candle to licensed software in terms of security, functionality and reliability.

And in the early years, Siebel was right about the quality and value of those ASPs, many of which dont exist anymore. But give Siebel credit for changing course when ASPs began to find favor with some customers and it became clear they were here to stay.

Now Siebel says it will pursue a hybrid strategy that will allow its customers to either buy Siebel-licensed CRM applications or subscribe to its CRM OnDemand hosted service. This approach makes a lot of sense: One size does not fit all when it comes to implementing CRM applications. What works for a company that needs 50 or 100 seats of a CRM package doesnt work for a company that needs 1,000 seats. And Siebel does not want to concede the lower and midsized market to established ASPs.

To that end, the acquisition this fall of UpShot and its online CRM applications was a smart one, as it is allowing Siebel to jump-start its OnDemand service. UpShots technology will enable Siebel to rapidly extend the functionality of the OnDemand CRM product.

Read John Pallattos column "Six Tips For ASP Success."

While the UpShot techonology and its 1,000+ customers are important to Siebel, company officials claim the UpShot people who join Siebel will be even more valuable because they bring with them years of experience in building an online CRM service.

The UpShot acquisition gives Siebel a lower risk approach to implementing CRM OnDemand because Siebel wont have to build an ASP from scratch. Its partnership with IBM to provide the hosting and application implementation services limits the amount of money Siebel had to invest in startup costs. This was not a small consideration for a company that was badly battered by the information services recession. Siebel recently announced that British Telecom will market, sell, host and support CRM OnDemand in the U.K.

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Next page: OnDemand and licensed software: Complementary businesses.