by Seth Fineberg

San Mateo, Calif (October 2003) - Siebel Systems Inc. has long been a dominant force in customer relationship management software used by larger businesses. But with the recent launch of a modestly priced, hosted CRM product — Siebel CRM OnDemand — the company opens itself up to the small to midsized business market and also to stiff competition.

In the mounting battle of hosted CRM, Siebel does have a lot in its corner, not the least of which are its years in the business and a solid co-marketing and development relationship with IBM Corp.

The two have entered into a multiyear joint development sales, marketing and services agreement that will utilize a sizable direct and channel sales force from their respective organizations. To market the new offering, Siebel and IBM are launching a $15 million integrated marketing campaign to achieve rapid market adoption.

And with a price point of $70 per user per month, Siebel realizes that the product may be well received by more than its established audience of large enterprises. It will also offer even more of a selection for customers eyeing hosted CRM from the likes of Accpac International, NetSuite Inc., Salesforce.com and Upshot.

“Our new product has all the advantages you would expect from a hosted solution; all you need is a browser and a credit card,” said Rich Reimer, Siebel’s director of product marketing for OnDemand products. “Our prime target is someone like the assistant to the VP of sales, even though there’s no reason why an IT pro can’t use it too.” He added that he expects it to be attractive to small and midsized businesses and divisions of larger enterprises.

Reimer also said that Siebel CRM OnDemand has an edge over the competition in its functionality and integration. He claims that the product is the only one on the market that is a true hosted and on-premises solution, in that users will not lose key functionality by using a hosted product.

“A lot of whom I consider our competition have simply taken existing on-premise software and just put it on the Web. We’ve built this from the ground up, and from a breadth perspective, it will mirror what you have onsite in terms of service, lead generation, solutions ratings and analytics,” Reimer said. “Our challenge was in being selective about the functionality [of our on-premises product] that makes sense in a hosted environment. We had to make sure we solved common problems and made it as easy to configure as MyYahoo.”

He also said that Siebel CRM OnDemand can integrate with all major accounting systems, thanks to an XML SOAP interface. Reimer also believes that accounting firms are a ripe market for this product — and the price may be right for them, as well.

Some analysts believe that SMBs in general are ready for hosted CRM products, due to their price point and relative ease of use. They aren’t entirely certain, however, that SMBs will immediately gravitate towards Siebel’s product.

“Leasing expensive business applications rather than buying them via the traditional licensing model can help a company cut short-term costs, but if the economy picks up, they may decide that the investment in a license will make more sense and give them the flexibility and tools in the configuration that they want,” said Karen Smith, a research analyst at Boston’s Aberdeen Group. “As for Siebel, they needed to develop new revenue and customer opportunities. Right now, they face the challenge of being positioned as a best-of-breed CRM provider to large enterprises and need to strategically develop new channels to get to market.”

Resellers for potentially competing products welcome Siebel to the market, much in the way they did Microsoft when it came to offer its desktop CRM solution. They believe that Siebel and IBM will spend a fair amount of time and capital to push the new product, ultimately lending validity and awareness to the idea of hosted CRM.

Alex Solomon, founder and co-president of New York-based reseller Net@Work, sells Accpac CRM products, as well as those offered by competitor Best Software. He claims that Accpac’s hosted CRM product, AccpacCRM.com, which only came to market in late August, has already garnered much interest largely because it is a true SMB product from a like vendor.

“Once they see how easy it is to use, they are sold on it too. It’s an inexpensive way to get on, and for Accpac, their customer is SMBs,” Solomon said. “For Siebel, this is a new customer, they don’t understand this space, and, without having seen the product, I think it’s going to be a huge struggle for them just for the fact that they don’t have an existing [SMB] strategy.”

Solomon also said that he is interested in exploring Siebel CRM OnDemand and, at press time, the company had promised him a look in about a month. Meanwhile, Solomon’s firm will use AccpacCRM.com as a primary sales tool for a new, CRM-focused sales force that he plans to hire in the coming weeks.