July 21, 2003, 3:28 PM — Two years after Siebel Systems Inc. shut down Sales.com, the company appears to be once again considering a foray into the hosted CRM (customer relationship management) market, this time through a joint offering with longtime partner IBM Corp.
While nothing official has been announced, analysts and competitors are already responding to rumors and press reports that Siebel is considering offering its applications online on a subscription basis, with IBM's Global Services unit handling hosting duties. IBM has similar arrangements with several applications vendors, most notably Onyx Software Corp.
The momentum of business software ASPs (application service providers) like Salesforce.com Inc. has been too strong for traditional vendors to ignore, according to Aberdeen Group Inc. analyst Denis Pombriant. In a May report, he named PeopleSoft Inc. and Siebel as vendors likely to create new hosted offerings by the end of the year.
"Salesforce.com showed the way. They've gotten a lot of publicity over the last year, and there's no longer any hiding that the cat is out of the bag. 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. As part of their ongoing partnership, the two companies talk frequently about potential new services and alliances, representatives said.
Analysts say 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 midsize 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 Inc. analyst Andrew Schroepfer thinks that the IBM network could eventually threaten the business of conventional vendors such as PeopleSoft, SAP AG 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.