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Siebel: second thoughts on hosted CRM

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Following a summer of rumor, Siebel Systems has finally spoken out and announced its intention to launch a hosted CRM service. Although widely predicted, the move will throw the already unsteady CRM sector into further turmoil and further raises the issue of whether the enterprise software industry is at a technology inflection point.

Siebel will offer CRM OnDemand as part of IBM's OnDemand program and provide sales, service and marketing capabilities to assist with lead and account management. The plan is to allow users to combine on-premises and on-demand solutions.

Siebel's motivation in moving to a service-based model has several facets.

David Schmaier, Siebel executive vice president, described it as a market-making and market-changing announcement, predicting that in future software would look a lot like this new Siebel model. Its goal was to provide software that was easy deployable, usable and affordable and could be integrated with Siebel's on premise software.

Both Siebel and IBM stressed that it was not a case of on-demand only or on-premises only and Mr Schmaier said that the approach would generate major new opportunities. In its current guise CRM OnDemand is generic and horizontal in orientation, but this is only the first of multiple offerings that will combine different services and different products and be geared towards different vertical industries or geographic locales.

With sales of licensed applications tumbling, Siebel needs to generate new sales. It also needs a lower cost offering to enable it to effectively compete with SAP, PeopleSoft and Oracle - particularly following PeopleSoft's value-based pricing initiative and SAP's decision to include the CRM component in sales of the mySAP Business Suite. Both initiatives come at a time when these broad-based suite providers have largely caught up with Siebel in terms of the breadth and depth of CRM functionality. At the other end of the market it needs to head off the growing threat and even lower price points offered by Microsoft Business Solutions and Salesforce.com.

There are also the issues of usability and user adoption, which are recognized as problems within the industry and CEO Tom Siebel is on record as saying the company has to reduce the complexity of its offering.

Web-based offerings, accessed via browsers, immediately reduce the level of complexity from a user perspective and Siebel is making much of the usability aspects of CRM OnDemand with its HTML-based zero footprint client.

Source: Computerwire/Datamonitor

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Reuters Business Insight, The CRM Outlook

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