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 Salesforce.com 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, Sales.com. Siebel launched Sales.com 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 Sales.com as a separate company, before shutting down the service altogether.
“Sales.com 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.
Executives of hosted CRM services vendors welcome Siebels arrival to the market, while predicting that it wont succeed there.
“Its good news that theyve come around and realized that this is the way to go,” said Mike Doyle, chairman and CEO of Boston-based Salesnet. But Doyle predicted that Siebel would only “cannibalize” its existing market, replacing huge upfront license fees with lower monthly service fees.
“Theyre going to have to lay off three-quarters of their employees to keep up with the cost structures of this business,” he said.
With the baseball playoffs in full swing, UpShot CEO Keith Raffel used a suitable metaphor.
“Weve been beating traditional vendors on the road—in the heart of their business with Fortune 500 companies,” said Raffel, noting that five of the largest 15 companies in North America are UpShot customers. “Now Siebel is coming to play in our ballpark. Were tough to beat at home. We have over four years of experience in selling an online Web-based solution, and Siebel is trying to play ball with a Release 1.0 product.”
NetSuite CEO Zach Nelson had a similar take.
“Most customers make their CRM decisions driven by whether an application has the functionality they need. When a Version 1 product like Siebel goes up against a product like NetSuite that has been developed over five years, Siebel will have a very hard time competing,” he predicted.
Forrester Researchs Kinikin agreed that Siebel is in the unaccustomed role of playing catch-up.
“What weve seen of Siebel CRM OnDemand so far seems credible and in line with the basics of other offerings—it wont blow the competition away, but its not another Sales.com,” Kinikin said, in Santa Clara, Calif. “However, Siebel will be playing catch-up on advanced features, an unfamiliar position for them.”
Gorman promised that Siebel and IBM are pouring “unparalleled” sales and marketing resources into the deal that other vendors, including Onyx, which has its own hosting relationship with IBM, cant match. He also said Siebel and IBM sales reps will be “very incented” to sell the new offering.
But Kinikin, while acknowledging the tremendous resources behind the offering, predicted that Siebel will still have issues with the sales channel.
“It takes time to build the sales expertise, and Salesforce.com and others are pretty far along in building effective sales reach,” she said. “Again, the big issue is commitment and focus—both Siebel and IBM have a lot of other things on their plate.”
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