According to Siebel Systems founder and CEO Thomas Siebel, the hosted CRM market is expected to generate US$1 billion in revenue in 2004, followed by $1.8 billion the following year. If the keynote address Siebel gave Tuesday at Comdex is any indication, he wants his company to grab a huge slice of that market.
Siebel’s keynote speech focused on his company’s “CRM for Everyone” strategy, highlighted by the “CRM OnDemand” initiative it launched recently in partnership with IBM.
“Siebel’s strategy is to use hosted CRM to extend [its] reach to business partners and remote users and smaller divisions that couldn’t normally afford Siebel [in-house],” Erin Kinikin, vice president and research director at Forrester Research, told CRM Buyer.
As Siebel put it: “Hosted CRM is an emerging market we think offers a great deal of utility, and we think we can combine these technologies and offer hybrid solutions and offer larger organizations the opportunity to utilize these. Our strategy going forward is to enable companies to deliver seamless and superior customer experience by extending CRM to everyone in their organizations and their partner ecosystems.”
The Rise of Hosting
According to Kinikin, the hosted CRM market grew 20 to 30 percent this year, while the licensed CRM market shrank 20 percent — a huge market shift in the space.
“We’ll have to wait for the economy to improve to find out how much of this [growth] was [the result of] companies looking for a temporary CRM band-aid, and how much was a fundamental change in how companies buy applications,” Kinikin said. “We’re finding the growth of the hosted CRM market fairly well divided between smaller companies and business-centric divisions of larger companies.”
Kinikin added that the best candidates for hosted CRM offerings are functional areas of an enterprise that operate independently, needing little integration and minimal customization. Sales is one such function, particularly in industries in which making a sale requires more effort than just taking an order.
“Hosted CRM is like the old departmental systems,” she said. “It’s easy to implement and easy to manage as long as you don’t try to get too fancy with it or connect it to a lot of other systems. But over time, users [may] build out more and more, and if you’re not careful, you end up with a mission-critical system that was never designed to be mission critical.”
Kinikin also noted that the IBM-Siebel partnership behind Siebel CRM OnDemand pairs the industry’s CRM leader with its hosting leader, freeing Siebel from having to get into the operations business.
For his part, Siebel said it is clear that CRM requirements have expanded and that his company’s OnDemand initiative offers the flexibility and scalability organizations require. With its combination of hosted and on-premise solutions, the company now can serve any type of user, any size organization and any industry, he noted.
Because the hosted solution shares a common architecture with Siebel’s on-premise CRM offerings, data sharing between the two versions is seamless, according to Siebel. He cited the National Australia Bank as an example of how the integrated solution works.
National Australia Bank already has Siebel call centers, sales automation and e-finance products as part of its on-premise Siebel CRM setup. At the same time, the bank wants its independent mortgage brokers around the world to be able to access the system. For those brokers’ sake, a hosted solution was integrated with the on-premise solution. The hosted solution also allows for global deployments that often require translation into multiple languages and currencies.
Siebel went on to say that the hosted portion of his company’s solution offers fast deployment, no up-front financial investment and no hardware, software or additional IT resources. It is based on a monthly subscription model and costs $70 per user per month. To promote the service, Siebel is offering a free 30-day trial for up to 10 users.
However, Siebel also stressed that users of CRM OnDemand can migrate easily to on-premise CRM once the need arises, suggesting that the company has not conceded that traditional CRM software is on the way out.
For her part, Kinikin said two arguments exist concerning the role of hosted CRM. One of those says licensed software is dead, while the other says licensed and hosted CRM offerings are complementary and appeal to different types of users.
“Of course,” she added, “since Siebel currently is nurturing a $400 [million] to $500 million licensed-revenue CRM business, Siebel is not going to push all its revenue to a pay-as-you-go hosted model unless the market forces them to.”