Oracle's acquisition of Siebel could breathe new life
into on-demand CRM, which removes the need for users to buy and
manage their own systems
Oracle's agreement to acquire customer relationship management
leader Siebel will not only shake up the enterprise application
market, it could give a major boost to hosted CRM, also known as
on-demand or application service provision (ASP).
Hosted CRM is growing in popularity, with organisations signing
up to use a CRM application on a pay-as-you-go basis or paying a
set monthly price to a service provider who hosts the application
and delivers it over a network to the user's web browser.
Hosted CRM suppliers include Salesforce.com, Siebel, SAP,
NetSuite, RightNow Technologies, Concerto, Digital River and Unica,
with Microsoft promising to get in on the act.
Siebel made its formal "software-as-a-service" debut in 2003
with Siebel CRM OnDemand, for which it claims to have gained more
than 28,000 subscribers in just over a year.
"The software-as-a-service model has changed the whole
perception of customer management with faster implementations,
quicker time to value, and easy customisation," said Robert Bois,
senior research analyst at AMR Research.
Erin Kinikin, Forrester Research vice-president, said Siebel's
successful CRM as a service offering was one of the company's main
attractions for Oracle. "Oracle has just woken up to the lucrative
hosted market, and needed an alternative to companies like
Salesforce and NetSuite," she said. "The nirvana of the hosted
market is a single offering that can scale from small companies to
large, and seamlessly move from hosted to on-premise and back.
"Siebel is two to three years down the ASP road, and could help
Oracle get an offering out more quickly. Siebel was using its new
architecture for its hosted product, which could let Oracle "battle
test" Fusion [Oracle's next-generation product that will combine
its range of applications] a bit sooner and help make sure the
hosted and on-premise products stay in sync."
Oracle's chief executive officer, Larry Ellison (pictured), said
incorporating Siebel CRM OnDemand "is a key part of the strategy -
we think it will be increasingly important as Siebel OnDemand is
improving rapidly". He added: "Many products will migrate to
OnDemand."
Salesforce.com chief executive Marc Benioff was, unsurprisingly,
more cynical about Oracle's plans. "Client/server software is being
consolidated by Oracle just as mainframe software was consolidated
by Computer Associates," he said. "Oracle's strategy is simple -
instead of innovating, buy as much installed software as possible,
call it all Oracle Fusion, and make sure it all uses Oracle's
database."
Benioff argued that Siebel CRM OnDemand was written for IBM's
DB2 database, and not Oracle, which could pose a problem for both
Oracle and Siebel users.
Gartner vice-president and fellow Michael Maoz added that both
Oracle and Siebel had been relatively unsuccessful at on-demand CRM
in the past.
Oracle went into on-demand four years ago but it did not make
any significant gains, said Maoz. "Siebel first went into it in
1999 without much initial success. To win in on-demand, you have to
have focus."
Oracle would not answer specific questions about its Siebel
acquisition - a policy it also adopted after its takeover of
PeopleSoft earlier this year.
Consolidation grows among CRM software
companies
Enterprise software giant Oracle's planned takeover of Siebel
for £3.24bn will make the company that started off as a database
supplier the biggest customer relationship management (CRM)
software vendor in the world.
Oracle will have four lines of CRM software: its own, and suites
from previous acquisitions of JD Edwards, PeopleSoft and
Siebel.
David Bradshaw, principal analyst at Ovum, said, "The
acquisition will give Oracle a strong leadership position in the
CRM applications market, since Siebel was the number one
vendor.
"It will also give Oracle solid support and maintenance revenues
and a foothold in SAP customers."
Salesforce.com banks on customised approach
Salesforce.com has pioneered CRM for users who want to avoid the
large upfront cost of implementing an enterprise system.
The main attraction of the service from Salesforce.com is that
it requires little IT infrastructure to get going. Users connect
over a browser and sign up for annual access to the service, paying
a monthly fee of £60-£70 per seat.
The company does not offer vertical market-specific products,
which means that it trails rivals, such as Siebel, for
functionality, said analysts. However, Salesforce.com has been
bolting on add-on products to make its service a better fit for
enterprise users, providing back-end integration and
customisation.
Chris Boorman, vice-president of marketing for EMEA at
Salesforce.com, said the company had decided not to make vertical
sector-specific versions of its product.
"Customers want a product to fit their specific needs, not the
general need of an industry, and we made it easy to customise the
product to fit any business need with our Customforce tool."
At this month's Salesforce.com Dreamforce conference, the hosted
CRM supplier announced further tools to customise its service.
In June, Salesforce.com released its Customforce 2.0
customisation toolkit for extending its core hosted services,
Salesforce and Supportforce. It uses "Formulas" to eliminate the
need for external codes such as Java, or applications such as
Excel, thereby reducing application maintenance costs.
"This is much more a point-and-click solution, designed for
end-users to manage. It's very customisable," said Tom Pringle,
analyst for call centres and CRM at research group Datamonitor.