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.
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.
Siebel isnt claiming that its OnDemand service will eventually supplant its licensed software business. It views the two offerings as complementary businesses—a 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.
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.