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Are, Siebel heading for a rumble?

Two hosted-CRM providers made announcements designed to attract new customers. As they butt heads more frequently, one analyst says, things could start to get ugly.

Hosted CRM got a little more attractive for users Wednesday, when Siebel Systems Inc. announced it would make its CRM OnDemand service free for the first 90 days. At the same time, struck an agreement with Nextel Communications Inc. to provide comprehensive mobile CRM on the wireless network.

Since San Mateo, Calif.-based Siebel began offering Siebel CRM OnDemand in December, the sales team has been "overwhelmed," said Keith Raffel, vice president of CRM OnDemand. The 90-day free-service period -- available to anyone who signs on -- includes 24/7 "gold-level" support. The program was enacted to speed deals through the sales pipeline, Raffel said.

Much of the interest in Siebel's hosted offering has come from existing customers looking to expand their current deployments to satellite offices, Raffel said. Siebel tends to run into more competition when vying for new customers.

"In the small and medium-sized area, we see a company headquartered in San Francisco, not surprisingly," Raffel said.

That company,, said its new arrangement with Nextel will help it better penetrate the enterprise space. That can only mean more competition with Siebel.

"They're going head to head," said Sheryl Kingstone, senior analyst with Boston-based Yankee Group. "It's going to be neck and neck, and it's going to get dirty. Right now, is the leader and Siebel needs to jump up."

With more than 8,000 customers, has a head start, but both companies are cranking up their press machines for battle. (Editor's note: also has a leg up in the number of news releases hitting reporters' inboxes.)

Last week, announced that two users of Siebel's CRM OnDemand UpShot edition -- ABP International Inc., a distributor of VoIP products, and Arasys Technologies, a provider of marketing and sales material distribution products -- had switched to Siebel acquired UpShot Corp., a Mountain View, Calif.-based hosted provider, in late 2003.

Another recent news release said that Expedia Corporate Travel, a travel-management company operated by Expedia, had signed on to use's latest edition, Winter '04.

But's press release boasting that Bella Pictures, a national wedding photography services firm based in Tacoma, Wash., had chosen its product over CRM tools from Siebel, Microsoft and Onyx Software Corp., elicited a laugh from CEO Tom Siebel.

When asked during an earnings call last week why anyone should care whether a wedding photography firm chose over Siebel, he said: "I have no idea. This wedding photographer [and] that release speaks for itself. I won't add any more comment to it."

On a serious note, Tom Siebel pledged that his sales team is just as aggressive with 30-seat deals as it is with enterprise-sized leads.

Meanwhile, Siebel, along with its hosting services partner, IBM, continues to spend heavily on CRM OnDemand marketing. Six thousand companies are in the sales pipeline, Raffel said.

Siebel has been promoting a hybrid approach to using CRM OnDemand -- pushing the idea of an organization running Siebel's on-premise software in its corporate headquarters but choosing the hosted offering for a remote office.

According to Raffel, an airline currently facing financial difficulties is working with CRM OnDemand as a cheaper, short-term solution before moving to a traditional deployment. That strategy is an advantage Siebel needs to exploit, Kingstone said. She noted that through its Sforce integration application, can also serve remote offices of companies that run on-premise Siebel software.

Siebel's re-entry into hosting, which has led to newfound competition in the space, may have another effect on's success. It could ultimately damage investor confidence in the days leading up to's planned public stock offering.

"I think it makes the IPO more imperative," said Denis Pombriant, managing principal with Beagle Research Group, Stoughton, Mass. "Salesforce is entering a new round of marketing requirements. It needs cash to assert itself and solidify its position. With Siebel's entry, and potentially other vendors in the coming months, I see the marketing cycle starting again."


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