Competitors prepare for Siebel CRM OnDemand

Siebel Systems's partnership this week with IBM on a new, hosted CRM (customer relationship management) service makes it the first enterprise applications vendor to prominently launch a monthly subscription service, but others in the applications market say Siebel's altered strategy won't affect their own product plans and pricing.

Siebel CRM OnDemand will compete most directly against the batch of ASPs (application service providers) that have emerged in the last few years to offer midsize businesses access to CRM functionality without the upfront costs and management complexity associated with standard CRM deployments. Leaders in the market include Salesforce.com, UpShot, NetSuite and Salesnet, each of which has attracted several thousand corporate customers to its offering.

Siebel's move comes at a time when it faces stagnant growth among its traditional customer base of large companies willing to invest millions in CRM systems. After peaking in 2001 at $2.1 billion, Siebel's revenue has been slipping, to $1.6 billion in 2002 and a forecast $1.4 billion in 2003. As the company's revenue contracts, so has its staff: Siebel's employee count has shrunk 40 percent since the start of 2001.

When Siebel exited the software-as-a-service business two years ago, it did so amidst dark comments from Chief Executive Officer (CEO) Tom Siebel about the ASP sector's viability. Competitors are quick to cast Siebel's return to the sector as a sign of strategic confusion.

"It's pretty comical to have them re-entering this space after disparaging it as such a terrible idea. It shows how desperate they are to reverse their revenue decline," said PeopleSoft CRM General Manager Joe Davis. "That hasn't been a problem for us."

Siebel has suffered in the past few years from its insistence on being a best-of-breed, single-application vendor, according to analyst Josh Greenbaum of Enterprise Applications Consulting.

Customers overpurchased during the dot-com boom, and were left with too much CRM firepower for their needs, he said. Instead of buying new licenses during the past few years, they've focused on installing and taking advantage of what they already own. Siebel's top rivals, such as SAP and PeopleSoft, have been able to approach their installed customer bases with other products from their portfolio. Lacking that product diversity, Siebel has been forced to try to wring new sales out of a slumping market.

"Staying the current course is not going to be a winner," he said. "For them to really continue to grow, they're going to have to find more products to sell and more customers to sell to."

Siebel executives say the company has not often run into the CRM ASPs in pitching new business. They expect Siebel CRM OnDemand to reach customers not otherwise inclined to buy from among the current crop of hosted offerings.

Analysts say the service has some advantages unmatched by the smaller CRM service vendors, including deep analytics capabilities and the availability of an upgrade path to a traditional Siebel CRM system. One customer beta testing the product, Planitax Chief Technical Officer Chris Stauber, agreed that it offers more advanced functionality than he's seen in other hosted CRM services.