On October 2, Siebel and IBM joined forces to announce a customer relationship management (CRM) software service known as Siebel CRM OnDemand. The service, which will run entirely on servers in IBM's hosting centers, will provide Web access to a broad range of CRM functions at a monthly subscription price of $70 per user. The new service should be available by the end of this year.
CRM OnDemand is a streamlined and more user-friendly version of Siebel 7, the on-site application suite that helped to launch the packaged CRM software market. As a fully hosted service, CRM OnDemand requires only an Internet connection and a browser, though it allows users to export some data to desktop applications such as Microsoft Outlook and Excel. The service includes fairly robust modules for automating sales, customer service, and marketing. It also offers built-in analytics that let managers monitor the performance of sales, marketing, and service teams. Siebel has built Web services into CRM OnDemand that IT departments can use to integrate the service with their internal systems. The vendor has also developed facilities that will let customers migrate from CRM OnDemand to Siebel 7, though the migration will not be an effortless one.
While CRM OnDemand is similar to hosted services from other firms, what distinguishes it from its competitors is the size and resources of the companies that are backing it. IBM and Siebel plan on selling the service through the nearly 40,000 account representatives who work for the two companies. In addition, IBM will use the 1,400 members of its small and medium business sales team and its telephone representatives--the same ones who have been calling iSeries customers once a quarter--to promote CRM OnDemand to medium-size companies. These teams will be backed up by a $15 million publicity campaign that Siebel and IBM are jointly funding. This will make the entire marketing and sales effort at least one and perhaps two orders of magnitude larger than any previous campaign for a hosted CRM service.
Another eye-opening feature of CRM OnDemand is its aggressive price. At $70 per user per month with no additional charges, the service will definitely appeal to mid-market firms that have considered on-site CRM packages to be out of their financial reach. Besides targeting such companies, Siebel and IBM will also court larger enterprises that already use Siebel 7, but have not deployed clients to some users because of cost issues. By giving these users access to CRM OnDemand, such firms can expand their CRM systems at much lower prices.
The Shape of Software to Come?
With its aggressive pricing, CRM OnDemand could cannibalize many sales of Siebel 7. However, that is a risk Siebel is willing to take because of the challenges it faces in the CRM market. Over the last several years, Siebel has faced more competitive pressure from vendors of cheap, hosted service alternatives than any other first-tier application vendor. These competitors--vendors such as Salesforce.com, Onyx, NetSuite, RightNow Technologies, and UpShot--offer simple alternatives to Siebel's complexity, long deployment times, and high costs. These weaknesses have caused Siebel's license revenues to decline at double-digit rates over the last several quarters while revenues for hosted CRM services have been doubling or tripling in size.
By launching CRM OnDemand and taking the service to market with IBM, Siebel is making a huge investment to reverse its fortunes. In the process, the vendor will put substantial pressure on its smaller rivals. This includes Onyx, a company that launched a similar hosted offering in partnership with IBM almost a year ago but may now get significantly less attention from its partner than in the past. On the other hand, the CRM OnDemand campaign could boost the fortunes of its competitors by validating their business model and getting more customers to consider hosted services. This could allow competitors to capture more business than they might lose to the new 500-pound CRM gorilla on their block.
While Siebel has its guns aimed at its hosted service competitors, IBM may be using CRM OnDemand to fight a much bigger rival on another front. When Microsoft released its CRM software suite earlier this year, it became clear that the software giant would use the suite to get medium-sized businesses to adopt Windows and .NET as their enterprise application platform. That is something IBM cannot allow, as it is investing substantial resources to win the mid-market over to WebSphere and the Java 2 Enterprise Edition (J2EE) platform. It just so happens that CRM OnDemand runs on WebSphere. That fact, combined with its low price, ease of deployment, and breadth of functions, makes it a powerful response to Microsoft.
While CRM OnDemand could help Siebel and IBM achieve many objectives, it may also become a critical catalyst for a wholesale change in the software industry. If the service becomes as big a success as Siebel and IBM want it to be, other vendors of traditional enterprise software could rush to embrace the "software as services" model. As a result, we could see a flood of trimmed-down, hosted versions of applications for managing warehouses, supply chains, logistics, human resources, and other tasks. These services would come not from small startups but from the largest software vendors at low, usage-based prices. While many customers would continue to run their enterprise applications on an on-site basis, a substantial percentage of the market could opt for cheaper, hosted versions of the same software.
In short, CRM OnDemand could be one of the "game changers" that comes around every once in a while to change the IT landscape. To judge for yourself, just point your browser to the CRM OnDemand Web site and ask for the free 30-day trial subscription. Then, watch Siebel and IBM to see how their joint marketing campaign fares. With the stakes as high as they are for both companies, the consequences will be far from trivial.
Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at
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