Siebel isnt claiming that its OnDemand service will eventually supplant its licensed software business. It views the two offerings as complementary businessesa way of offering enterprise-level CRM applications to a wider range of organizations. It is providing an essential selection of CRM sales, marketing and customer service applications with the intention of offering more features as it combines functionality from the UpShot online CRM applications with OnDemand. But until the two products merge by the middle of next year, the UpShot technology, dubbed UpShot OnDemand, will co-exist with the Siebel service offering.The OnDemand approach will do far more than give Siebel a new revenue stream and a means to counter the encroachment of the purpose-built CRM ASPs, such as NetLedger, NetSuite, Salesforce.com, Salesnet or Surebridge. Its a way to bring a wider range of organizations into the fold with the goal of retaining them as customers for the long term.A company that starts out with 100 ASP CRM seats this year could turn into a 1,000-seat on-premises customer a few years down the road if the technology proves its worth. It gives Siebel time to develop the relationship and discuss the economic trade-offs between online and on-premises access to the applications. Siebels argument is that while OnDemand is a relatively less expensive way of getting started with CRM, the cost of subscription and maintenance fees mounts up month after month. An online customer can soon get to the point where a licensed, on-premises installation would be the more economical option. Read John Pallattos column "Best Practices for CRM Implementations." So we have entered a new phase in the great experiment testing the utility and value of ASPs versus licensed software. Siebel has a chance to demonstrate whether its hybrid approach that relies on third parties to provide the hosting and that offers both ASP and on-premises products can provide as much value to customers as the offerings of the purpose-built CRM ASPs who host their own applications. Siebel has a lot more riding on the outcome than the money it has invested in UpShot and in CRM OnDemand. It could prove to be the key to the companys future growth and stability. eWEEK.com Enterprise Applications Center Editor John Pallatto is a veteran journalist in the field of enterprise software and Internet technology.