Black and Blue: Onyx CRM to be Hosted by IBM

IBM Friday began delivering on its aggressive plan to better serve mid-market customers by offering hosted applications from four leading independent software vendors, including a CRM solution. The new applications, which focus on human resources, accounting, and sales force automation, are the first wave to be delivered in IBM's new On Demand strategy. IBM created On Demand to help its customers extend their businesses by integrating fully with customers, partners, and suppliers, and by using IT to increase flexibility and responsiveness, according to Elaine Lennox, director of marketing for global small and medium business. Speaking at the end of October, IBM CEO Sam Palmisano said IBM saved $6.2 billion in costs by adopting integration technologies, but predicted that its savings from On Demand technologies will be even greater. In addition, IBM is committing $10 billion in research and development, acquisition, and marketing funds for the On Demand plan. The first CRM offering is from Onyx Software Corp. For $85 per user, per month, customers will have access via a browser to Onyx's offering, which will be hosted by IBM at one of its data centers around the world. IBM's Lennox says she expects demand for Onyx to be primarily in businesses with 250 to 500 employees. Lennox also says this is not an exclusive agreement and IBM expects to sign more CRM mid-market vendors. However, she declined to say how many. Denis Pombriant, vice president and managing director of the CRM practice at Aberdeen Group, a Boston-based researcher, says it is clear IBM is attempting to stake an aggressive claim in the mid-market. "The mid-market is the new and lucrative battleground," he says, noting that there are nearly six million companies needing CRM in the SMB and mid-market segments. Currently more than 20 percent of IBM's annual revenue of $86 billion comes from the SMB market. Lennox says the company plans to spend more than $100 million in marketing for its mid-market push, but she declined to provide any growth projections for IBM's SMB business. Lennox also declined to specify how it would distribute the $100 million slated for marketing. Other On Demand applications announced Friday include: human resources software from Employease Inc.; HRSmart's human capital management solutions; and Intacct Corp., a real-time accounting system. IBM officials say On Demand applications let customers focus on core business issues while having access to software for as low as $50 per user per month that enables them to respond quickly to changing market conditions. By hosting the third-party applications, IBM also helps customers reduce IT expenses. Pombriant says that is the same song ASPs have been singing for years. "There is some risk in this," he says. "There have been many players that tried the ASP route and couldn't figure it out. And while there are plenty of people still doing it, it's the guys doing it right for your business that matter."