Siebel begins building channel sales program

After years of only selling directly, Siebel Systems Inc. has decided it needs a channel to help revive its flagging growth.

In a move primarily aimed at small and medium-size companies, the company Tuesday announced it has recruited a dozen consulting and implementation firms in the U.S., Europe and Latin America to seed its new channel sales program.

At a coming-out event here in San Francisco, the company introduced recently appointed SMB (small and medium business) General Manager Bruce Cleveland and unveiled the new channel partnership network he's constructing.

Siebel, which grew into the industry's dominant CRM (customer relationship management) vendor by serving large enterprise accounts, began eying the SMB market last year, when it dove into the expanding hosted software market with Siebel CRM OnDemand. But the company continued its direct-only sales strategy: When it bought hosted-CRM maker UpShot Corp. in Oct. 2003, it scrapped UpShot's partner program.

Now, Cleveland and Siebel Chief Executive Officer (CEO) Mike Lawrie said they expect their new consulting and implementation partners to help them reach smaller organizations that prefer to do business with local services companies.

Siebel intends its channel program to be a small, exclusive network. The company will work closely with its partners and share with them internal information and sales forecasts, as well as training and marketing funds. Consequently, it asks its partners to limit ties with other midmarket CRM vendors, like Microsoft Corp., which has a broad channel network.

"There's a set of hurdles that they need to overcome to be invited into the program," Cleveland said. Partners need to demonstrate expertise with CRM implementations and with Siebel's products, and to meet Siebel's requirements for sales team staffing and training and marketing investments.

Siebel's channel partners will be able to sell both its hosted, subscription CRM OnDemand service and its SMB-aimed, on-premise Professional Edition. The SMB market, as Siebel defines it, consists of companies with up to US$500 million in annual revenue.

Heading downstream is a common strategy for companies seeking growth: Siebel rivals SAP AG, PeopleSoft Inc., and Oracle Corp. have all introduced new SMB strategies and initiatives in the past few years as they look for share in a market analysts say is far less saturated than the high-end enterprise segment. Meanwhile, Microsoft is looking to go upstream, building on its desktop applications sovereignty to enter the low end of the back-end, enterprise applications market.

Siebel jumped into the SMB space last October when, in partnership with IBM Corp., it unveiled CRM OnDemand, which competes with traditional midmarket CRM offerings like SalesLogix and against hosted services such as Salesforce.com. Siebel's then-CEO, founder Tom Siebel, confidently predicted that Siebel would blow past Salesforce.com Inc. to become number one in the hosted CRM market within a year of its entry.

The company has failed to live up to that lofty boast. While Siebel refuses to comment on the size of its OnDemand customer base, an IBM SMB marketing executive at Tuesday's press conference referred to the product's "hundreds" of customers. Salesforce.com ended October with more than 12,000 customers and 195,000 subscribers.

Cleveland, who also serves as Siebel's OnDemand general manager, said he thinks internal obstacles kept OnDemand from taking off.

"What's hurt OnDemand initially was that we needed to get a competitive product," he said in an interview. "We went through five releases in a year. These days, when we get in deals, we win."

Siebel also needed a thorough overhaul of how it positioned its SMB offerings and how it compensated its sales teams to avoid conflicts, Cleveland said. The company's new goal is agnosticism about which delivery model SMB customers choose -- on-premise or hosted -- and about whether they buy directly or through a partner.

Such radical changes wouldn

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