Analyst News -- November 2003

Nearly two years after Siebel abandoned plans to offer its customer relationship management (CRM) software online, the company has now done an about-face. In conjunction with IBM, Siebel will soon launch Siebel OnDemand, a new, hosted system that makes its software available over the Internet for a small monthly fee. The offering will initially target the small to midsize business (SMB) market, with plans to extend into the enterprise space. Bringing Siebel into the OnDemand family is a big win for IBM, and it helps Siebel to penetrate the midmarket and potentially increase its footprint with existing customers. However, this will also pit Siebel against itself in deals.

What It Means

This is a good first step that will become more potent for customers as Siebel and IBM deliver on the future goals of adding vertical functionality to the hosted product. These enhancements will eventually add CPG-specific components like promotion management. The strength of IBM and a Siebel product built from the ground up show great promise for companies. Siebel will just need to take the work one step further. Consider the following points:

IBM as a power user

IBM uses Siebel software internally today, running the largest implementation out there (more than 10,000 end users). It is also one of Siebel's biggest sales channels. The Takeaway: IBM will make Siebel CRM OnDemand work because it's invested a lot in the success of Siebel.

Siebel addresses usability criticism

Siebel has been criticized heavily on usability, so the company took a different approach with this product to make it friendlier. Rather than trying to morph the existing Siebel system into Siebel CRM OnDemand, it was built from the ground up with a design that looks a lot more like Yahoo! or Google. The Takeaway: Existing Siebel customers should apply pressure to Siebel to make the same usability improvements in future releases of the traditional system in the near term.

Siebel competes with Siebel

Siebel sees the CRM OnDemand product and its traditional enterprise applications as two different products for two different sets of users (Siebel CRM OnDemand for casual users with limited needs for complex functionality, and traditional Siebel applications for power users with detailed requirements). Part of Siebel's value proposition is that companies can migrate from the hosted application to the traditional one, but organizations of all sizes are increasingly choosing ease of use over functionality. The result: Siebel will wind up competing against itself in deals. The Takeaway: Unless the existing interface is improved for the enterprise applications, users will not have a compelling reason to migrate, even if they want the more complex functionality.

CRM OnDemand currently includes basic sales, marketing, service and analytics functionality required for casual users to €get the job done.€ No vertical functionality has been added to date, meaning that it will have limited appeal to CPG companies today. No roadmap has been delivered in terms of when CPG-vertical functionality such as trade promotion management, consumer services, marketing process management, consumer direct marketing, and brand Web sites will be added, but Siebel has announced a three-year joint development deal with IBM to add vertical functionality to the solution.

The Enterprise Angle

While IBM and Siebel are initially targeting the midmarket, large enterprises will be interested too. Siebel plans to sell to divisions, remote users, partners, etc. of companies that use the enterprise applications to further extend its reach in its customer base. The important point here--Siebel's enterprise applications and Siebel CRM OnDemand share the same data model to support data integration. While Siebel is positioning this as automatic integration through UAN, customers must take the level of customization into account before accepting this strategy at face value. The Takeaway: Siebel CRM OnDemand offers a way to extend Siebel to additional areas in an enterprise, but buyers must be wary of how much effort is really required to integrate data across Siebel CRM OnDemand and traditional applications.

Long-term costs

Scheduled for release the fourth quarter, Siebel CRM OnDemand is priced at $70 per user per month (less than some other hosted products). Therefore, if an organization plans to use a hosted application for multiple years, it may be cheaper in the long term to own the application and manage it in-house. The Takeaway: Don't ignore the long-term cost equation.

Recommendations

Siebel and IBM are offering a free 30-day trial of the software. Every company thinking about implementing a hosted product should take them up on it as a point of comparison. It's free for a month, so why not? Existing Siebel customers, which will be envious of the simplified interface, will demand that Siebel introduce it as part of future releases.

Organizations currently pursuing selection projects for hosted applications that already have Siebel in place should put Siebel CRM OnDemand at the top of the list.

Companies with basic sales, marketing, service and analytics requirements that don't have Siebel but are looking at pure play hosted applications should add Siebel CRM OnDemand to their selection process.

Current CPG Siebel customers should wait to make any changes until vertical functionality is delivered in upcoming versions of Siebel CRM OnDemand. If your organization needs a hosted solution now or has basic functional requirements that don't include sophisticated promotion management, for example, the common application may be enough. To determine the fit, take advantage of Siebel's trial program.