Siebel Betting Hosted Offering Will Extend Enterprise Reach

The company plans to sell its new Siebel CRM OnDemand service heavily into its existing customer base.

Siebel Systems Inc. plans to sell its new Siebel CRM OnDemand service heavily into its existing customer base, according to the executive heading up the companys latest foray into hosted customer relationship management services.

Siebel and IBM announced Thursday that the two companies will team up to develop, market and deliver the service, which will be priced at $70 per user per month.

Richard Gorman, vice president of the San Mateo, Calif., company, said he expects many of Siebels enterprise software customers will deploy Siebel CRM OnDemand at the department level to extend the reach of the companys software to areas that the licensed version hasnt penetrated yet.

The hosted service can then integrate easily with the licensed version, Gorman explained, a key differentiator he says between Siebel CRM OnDemand and existing hosted offerings from companies like Inc., UpShot Corp., NetSuite Inc. and Salesnet Inc.

"IT departments have a backlog; they cant get to all their different divisions for another nine to 12 months to install and implement the software," Gorman said. "Were the only ones who can tie into Siebel Enterprise and share opportunities and information."

Gorman conceded however that no existing Siebel Enterprise customers have yet signed up for Siebel CRM OnDemand.

Gorman said the new offering, slated for availability by December, goes well beyond Siebels last foray into hosted CRM services, Siebel launched in February 1999, then closed the service in July 2001.

Though originally billed as a destination site for sales professionals, the site did offer online access to sales tools such as opportunity, account and contact management as well as a calendar and action items list. It added document management and Web conferencing services later and charged about $20 a month for the service.

Siebel actually raised about $27 million in venture funding in an aborted attempt to establish as a separate company, before shutting down the service altogether.

" was basically a place where you could type in your personal accounts and contacts but you couldnt share them with the rest of your sales team," Gorman said. "This is a completely different end-user experience. You can share information with groups right out of the box."

Siebel intends to target the service at small to medium-sized businesses that arent yet customers as well. The typical Siebel CRM OnDemand customer will have revenues of less than $500 million and between 20 and 100 users of the service, Gorman said.

Siebel expects many customers to maintain mixed environments of Siebel Enterprise and Siebel CRM OnDemand. Some customers will also start out on the hosted service then migrate to licensed software, while others will remain on the service indefinitely, Gorman said.

The service will offer easy configuration and customization capabilities but will require no upfront installation fee, as many hosted CRM services now do.

"You can just type in your credit card number and be up and running," Gorman said.

Siebel Systems CEO Tom Siebel had previously maintained that the hosted services model for CRM wasnt sustainable and wasnt the way customers wanted to go. What changed?

Gorman concedes that customer needs have "evolved over time" and that as the economy has weakened, a pricing model that doesnt require large upfront costs has become more attractive, particularly in the lower end of the market, which the company has not been able to penetrate with its Siebel Mid-Market Edition.

"Weve become the largest provider in the midmarket, but the smaller companies dont have the infrastructure to do software deployments," Gorman said. "Its a tremendous barrier, and these companies represent a very large market."

Forrester Research Inc. predicts that hosted CRM services will experience double-digit growth this year while the overall CRM market declines by 15 percent to 20 percent.

"Siebel has to have a hosted CRM offering to compete in hosted deals, most of which are business—not IT—driven and can lead to larger deployments later," said Erin Kinikin, a Forrester vice president and research leader.

Next page: Rivals predict tough going for Siebel.