Siebel courts small, midsize firms

CRM market leader Siebel Systems hasn't forgotten the little people. It's new mantra, "CRM for everyone," is intended to reflect an easier, more affordable Siebel - a theme that was pervaded at the software maker's user conference held last week in San Diego.

Executives say they hope the message of inclusion will beef up Siebel's appeal to small and midsize companies that want the features of full scale, on-premises CRM but have shied away from buying because of implementation challenges and costs.

The cornerstone of Siebel's new product strategy is its hosted CRM service, developed with hosting partner IBM and unveiled for the Siebel User Week 2003 conference. Siebel CRM OnDemand is expected to deliver CRM tools faster, easier and less expensively than the company's licensed software suite, Siebel officials say.

The model is designed to appeal to smaller companies than those that make up Siebel's traditional client base. The vendor also wants its existing customers to use the service to deploy CRM to remote locations and subsidiaries where they haven't deployed Siebel's licensed version.

The vendor says its hosted CRM product can be seamlessly integrated with - or automatically migrated to - an on-premises deployment of Siebel's CRM software. In this way, users can start with a small CRM project and expand the system as needs change, Siebel officials say.

CEO Tom Siebel said the hosted offering addresses customers' changing needs. "Enterprise software must embrace the speed of change in business into its DNA," Siebel said last week during his keynote speech at the conference. "In this new era of CRM, we see hybrid solutions to meet the requirements of distributed business models."

CRM OnDemand is Siebel's second hosting attempt. The company launched its Sales.com service in February 1999 and at one time planned to spin off the unit. Instead, Siebel shuttered the losing venture in July 2001.

Siebel's re-entry into the hosted CRM market comes as analysts say CRM buyers are shifting their purchasing preferences toward the application service provider (ASP) model. For example, license revenue will decline at an average annual rate of 4.8% over the next three years, while subscription revenue will hit $2.8 billion by 2006, Aberdeen Group says. In a recent survey, Aberdeen found 35% of respondents use CRM delivered by a hosting service, and 85% of prospective CRM buyers would evaluate a hosted CRM service.

Aiming for a revenue boost

Like many software vendors, Siebel lately has battled to increase license revenue.

Earlier this month, Siebel announced that it expects to hit its profit targets for the quarter that ended Sept. 30, but miss its revenue mark. Third-quarter revenue will range from $320 million to $322 million and license revenue will range from $109 million to $110 million, the company said. (Final quarterly figures are due out this week.) Analysts were expecting Siebel to report total revenue of $328.4 million.

Meanwhile, Siebel has embarked on a series of layoffs and office closures to cut costs. The company reported that it is on track to achieve its previously stated goals of cutting quarterly expenses by $30 million by year-end. The company intends to cut expenses further to increase that quarterly savings to $40 million by the second half of next year.