2 October 2003 Customer relationship management (CRM) software giant Siebel Systems has announced plans to offer its applications over the Internet as a low-cost, hosted service, just two years after abandoning its previous attempt at this strategy.
The new service, Siebel CRM On Demand, will cost $70 per user per month and will be available by the end of 2003. Partner IBM will host the applications at its Boulder, Colorado data center and users will access them at www.crmondemand.com via a web browser.
Siebel’s first attempt to offer software as a service, Sales.com, was launched in 1999 and spun off in December of that year as an independent company. During 2000, however, the loss-making venture was quietly re-acquired by Siebel and shut down altogether in June 2001.
In a recent interview with Infoconomy, Siebel’s group vice president of CRM strategy, Peter McCullough, acknowledged that the first generation of hosted applications failed to deliver on the model’s potential. “Sales.com was [just] a community bulletin board for sales people,” he said.
However, he insisted that the application service provider (ASP) concept was still valid. “Tom [Siebel, CEO of Siebel Systems] says ASPs will play a very key role in future software delivery. Timing is everything,” he said.
The success of other, smaller companies in selling CRM applications as a service — most notably Salesforce.com — has no doubt prompted Siebel’s rethink. Salesforce.com executives claim that 100,000 users in 7,500 companies have registered to use its service and that sales more than doubled in its last financial year.
Although it is a far larger company and the market leader in CRM software, Siebel cannot afford to disregard that kind of growth. Its revenues fell 22% to $1.6 billion in its 2002 fiscal year. Worse still, licence revenue tumbled 34% to $700.3 million, from over $1 billion in the previous year.
In order to offset dwindling sales to large, multinational companies, Siebel must attract new, smaller customers that do not have the resources to commit to the large upfront investment and lengthy installation process typically associated with its software.
At the same time, it must be careful that sales of $70 subscriptions do not cannibalise traditional license sales, for which it charges between $1,500 and $2,500 per user.
Steve Garnett, senior vice president and European general manager for Salesforce.com, not to mention also a former Siebel employee, says he “welcomes” Siebel’s re-entry into the market, describing it as “a great endorsement of our model.”
However, he predicts that Siebel will be “better prepared” this time because of the example set by Salesforce.com. If it is, Siebel is well-equipped enough and sufficiently large to present Salesforce.com with some serious competition.