Siebel CRM OnDemand: Siebel and IBM Provide More Than a Midmarket Alternative

Siebel and IBM launched Siebel CRM OnDemand this week, a new hosted system initially targeting the Small to Midsize Business (SMB) market, with plans to extend into the enterprise space. Bringing Siebel into the on demand 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.

The Bottom Line: Buyers will choose ease of use over functionality and purchase Siebel CRM OnDemand rather than Siebel 7.5 unless Siebel expands the ease-of-use design elements of Siebel CRM OnDemand to all of its products.

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. The strength of IBM and a Siebel product built from the ground up show great promise for user 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 in Siebel CRM OnDemand

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 these 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.

There’s an enterprise story here, too

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 their 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.

Siebel takes on other hosted applications

Siebel CRM OnDemand will go head to head with the other hosted applications out there. Interestingly, a significant number of pure play hosted deals have stemmed from large enterprises that have implemented Siebel but whose users find it too difficult to navigate or whose CIO decided that it was too costly to roll out Siebel to additional areas. The Takeaway: Based on the shared data model, Siebel CRM OnDemand should be put at the top of the list by companies that already have Siebel and are pursuing a hosted system to augment it.

It will be interesting to see how Siebel CRM OnDemand fares against other pure play hosted applications in greenfield deals. The competitive distinction is a much easier sell to those that already have Siebel and want to extend it or those who are looking for a faster, more user-friendly version of Siebel. The Takeaway: salesforce.com has a significant lead in the space, and it should continue winning when a Siebel system is not already in place.

Think about 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). 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. Check it out through the free trial and add your pressure to the list.
• 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 Siebel customers that require industry-specific functionality, such as Financial Services, Insurance, Automotive, and Pharma, should wait until vertical functionality is delivered in upcoming versions of Siebel CRM OnDemand. IBM and Siebel have a three-year joint development commitment to deliver industry functionality. If you need something now, the common application may be enough--again, use the 30-day trial to figure it out.