Siebel partners with IBM for hosted CRM plunge

CRM heavyweight Siebel is prepared to once again dive into the hosted applications market, this time in partnership with longtime ally IBM.

The two companies have sealed a deal to begin offering a $70 per user, per month service, making Siebel the first enterprise CRM vendor to bring out a subscription product to compete head-to-head against the growing ranks of CRM ASPs.

Dubbed Siebel CRM OnDemand, the service is scheduled for fourth-quarter launch. Customization is designed to be handled in-house by customers, with no consultants needed and added no installation expenses: The $70-per-user monthly subscription will be the software's only cost, according Richard Gorman, Siebel's senior vice president of products. Siebel and IBM will jointly market the service though their sales forces and through a $15 million publicity campaign.

Small and midsize businesses are the main intended audience for the service, but Siebel also hopes to entice larger businesses to use it for expanding CRM deployments. Ten potential buyers are now testing the product, Gorman said. He anticipates the average deal size will be for 20 to 35 users. There are no minimums or maximums on the number of licenses companies can purchase. While Siebel CRM OnDemand has a custom architecture and user interface, it will integrate with and offer upgradability to Siebel's traditional software.

Siebel was an early competitor in the CRM-as-a-service market, launching Sales.com in 1999 to offer browser-based sales tools. Two unprofitable years later, the venture was scrapped. Since then, however, a pack of independent vendors has carved out a midmarket niche, offering smaller organizations - and even departments at larger ones - access to some of the functionality traditionally found in large, complex business applications, without the implementation hassles and high price tags associated with those packages.

Siebel isn't worried about competing with the pure-play CRM ASPs, Gorman said.

"There's a couple of smaller start-ups in this space, but it's 99.99% untapped territory," he said. "There haven't been good, credible solutions from established companies. We think the market will expand with our entry."

One of those "smaller start-ups" is Salesforce.com, a four-year-old company that claims 100,000 end users for its hosted CRM service and close to $100 million in forecast revenue for this year. Salesforce.com routinely runs up against and beats Siebel in pitching new business, and expects to continue successfully beating out Siebel's new hosted service, Salesforce.com CEO Marc Benioff said.

"Siebel's business has gone to hell in a handbasket over the last three years. They've had an uncontrolled, precipitous decline in revenue, mostly because their product is too complex, too hard to use, and too expensive," Benioff said. "(Siebel CEO) Tom Siebel has had a lot of aggressive comments over the years about our business. Now we have Siebel basically validating what we've been saying for the last four years: It's the end of software, and on-demand computing is the future."

The IDG News Service is a Network World affiliate.