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Siebel gets back in hosting game with IBM deal

Siebel and IBM confirmed months of speculation today when they rolled out a joint offering for hosted CRM.

This morning, Siebel Systems Inc. and IBM spilled the beans on the worst-kept secret in CRM -- their hosting partnership.

The newly announced service, designed for small and midsized customers, was christened Siebel CRM OnDemand and will cost $70 per user per month. It will be available by year's end, the companies said.

Siebel and IBM will jointly develop, market and sell Siebel CRM OnDemand. Siebel will provide the application functionality based on its data model, as well as handle customer support and billing issues. IBM is building the hosting infrastructure on WebSphere, its J2EE application server.

Siebel CRM OnDemand delivers sales, service, support and analytics over the Web. In addition to account and opportunity management, sales forecasting, campaign management and service-request management, it includes 35 prebuilt reports and dashboard views. It provides about 40% of Siebel's enterprise functionality, according to David Schmaier, Siebel executive vice president

The offering also integrates with Siebel's on-premise CRM software, giving smaller companies the ability to start with the hosted application and eventually move to an in-house implementation. Larger organizations may also choose to roll out Siebel CRM OnDemand to smaller units or to independent agents, franchises and dealers, Schmaier said.

"We think this is the way enterprise software will be built in the future," he said. Siebel and IBM designed the offering specifically for hosted delivery.

Today's announcement confirms months of speculation that Siebel planned to return to the hosting business. Its first foray into hosted CRM ended in disappointment. Two years after the 1999 launch of a Web-based offering dubbed, Siebel scrapped the initiative because of disappointing revenue.

Denis Pombriant, vice president and research director at Boston-based Aberdeen Group, said that customers shouldn't blame Siebel for the failed

"Since then, Siebel has re-architected and built Web-friendly functions that can be hosted on Web," he said. "They have some of the ease and simplicity that hosted users expect. The new version has a lot going for it in terms of robustness and ease of use."

Siebel, the CRM market leader with 3,500 worldwide customers, said it currently has 2 million licensed users working with its software. But lately the San Mateo, Calif., vendor has struggled.

Thus far this year, Siebel sales are off 25%, and the company saw second quarter profits drop 67%. In July, Siebel cut 490 jobs.

Meantime, several providers have had great success with hosting -- which is typically a less expensive and quicker way for small organizations and divisions of large companies to deploy CRM. Most notably, San Francisco-based has more than 7,000 companies running its hosted CRM service.

Cary Fulbright,'s chief strategy officer, said that if Siebel CRM OnDemand is such a great offering, "there's no reason [for Siebel] to sell its client-server software." He added that there's little incentive for Siebel's sales force to push the hosted offering without "cutting their own throat" on costlier, on-premise implementations.

This isn't IBM's first hosted CRM deal. In March, Big Blue partnered with Bellevue, Wash.-based Onyx Software Corp. Their offering emphasizes added customization and integration capabilities and sells at a much higher price point: $150 per user per month, plus startup costs that are based on the complexity of the project. Just one customer is currently using the hosted software.

Ben Kiker, Onyx senior vice president and chief marketing officer, said IBM made it clear from the outset that it would pursue multiple ISVs within a market to help it execute its e-business on-demand strategy. He also questioned whether Siebel's $70 monthly subscription fee will deliver the full functionality organizations need. Siebel's Schmaier said the price includes sales, marketing and service capabilities.

"To get what you need, you'll have to open your wallet, sell the kids and mortgage the company," Kiker said. "Siebel has a reputation for being too complex, too expensive and for delivering little to no ROI. The $64,000 question is: 'How does that cloud hanging over them impede their ability to be successful in this venture?'"

Pombriant said Siebel CRM OnDemand doesn't necessarily mean bad things for Onyx. "If anything, it may draw some attention to [the] fact that Onyx has been doing this for a while," he said.

Pombriant said the pressure is now on Siebel competitors like SAP AG and PeopleSoft Inc. to ready a hosted CRM offering.

Organizations can try Siebel CRM OnDemand free for 30 days. Siebel and IBM will embark on a $15 million ad campaign to promote it. It will be hosted in a shared server environment and eventually will support multiple languages and currencies, Schmaier said.


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