Siebel to move into hosted CRM market with IBM

Two years after Siebel Systems shut down, the company appears to be once again considering a foray into the hosted CRM...

Two years after Siebel Systems shut down, the company appears to be once again considering a move into the hosted CRM market with longtime partner IBM.

While nothing has been officially announced, analysts and competitors are already responding to rumours and press reports that Siebel is considering offering its applications online on a subscription basis, with IBM's Global Services unit handling hosting duties.

The momentum of business software ASPs like has been too strong for traditional suppliers to ignore, according to Aberdeen Group analyst Denis Pombriant.

" showed the way. They've had a lot of publicity over the past year, and there's no longer any hiding. The technology works, and the market demand for this style of solution is growing," Pombriant said.

Officials at IBM and Siebel declined to comment on whether a specific deal is in the works and said that as part of their ongoing partnership, the two companies talked frequently about potential new services and alliances.

Analysts said a hosted CRM offering would make strategic sense for both companies.

Siebel has posted a string of disappointing quarters as it struggles to find buyers for its business applications in a tight spending environment for enterprise software.

Most buyers for hosted CRM products are small and midsized companies, which have been spending more freely during the downturn than have their larger counterparts. A software-as-service offering could help Siebel penetrate that market and expand its customer base.

IBM, meanwhile, has made increasing its sales to SMBs (small and medium-sized businesses) a company-wide priority. It began constructing last year a network of ISVs (independent software vendors) to offer their wares as IBM-hosted applications, available to customers for a per-user monthly fee.

Tier 1 Research analyst Andrew Schroepfer thinks that the IBM network could eventually threaten the business of conventional suppliers such as PeopleSoft, SAP and Siebel, unless they can find a way to take advantage of the growing interest in hosted application services.

"Siebel is largely considered the best-of-breed, but they have no market opportunities because their systems are so expensive and have so many features. Going on IBM's platform would be a way for Siebel to penetrate the midmarket," he said.

Siebel's online CRM venture lasted two years but never generated the demand Siebel hoped for. Launched in a time of dot-com enthusiasm, the initiative wilted once the economic mania subsided.

Aberdeen's Pombriant said Siebel is now better positioned to offer on-demand CRM than it was in the days.

"Siebel, like a lot of suppliers, has, over the past few years, been through a process where they've re-architected their applications. Their applications today are much more lean, much more web-oriented - they are at home in a browser. All those things were missing in," he said.

Dedicated CRM ASPs are, unsurprisingly, sceptical about the prospect of Siebel entering their market. 

"With the architecture that Siebel has, I think it's going to be particularly clumsy and cumbersome," said Salesnet chief executive officer Mike Doyle. 

Several enterprise applications suppliers, including PeopleSoft and Oracle, offer hosted versions of their software.

Salesnet does not usually run into those companies in pitching new business. Though his company competes with both traditional and hosted applications suppliers, its main competition remains other dedicated ASPs, including Salesforce and UpShot, he said. 

Whether or not Siebel joins with IBM, the company is at some point soon going to have to address the growing customer interest in hosted applications, Pombriant said. He sees the ASP model as a development that is fundamentally altering the business software market.

"I think hosting might be one of those technologies that you see periodically that drives the industry out of recession," he said. "It appears that the interest in hosting just keeps accelerating."

Stacy Cowley writes for IDG News Service


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