Hosted CRM Is Hot

Not long after launching Siebel OnDemand and acquiring hosted CRM provider UpShot, Siebel Systems has set it sights on surpassing incumbent hosted CRM darling Salesforce.com. OnDemand, a $70 per seat per month hosted CRM solution, aims to be a rapidly deployable full-strength CRM solution with integrated analytics and built-in connectors to traditional enterprise Siebel software. Legacy UpShot customers will continue to be supported in a special branch of the OnDemand software. Forrester Research Vice President Erin Kinikin says that Siebel's latest foray into hosted CRM is a much-needed effort to get revenues back on track, but will be dead in the water without support from the sales force and reseller channel. "This is a market Siebel has to be in strategically, but Siebel is not oriented to reaching the midmarket," Kinikin says, adding that OnDemand partner IBM is equally ill-equipped. Even so, CEO Tom Siebel predicts that in 2004 Siebel will be the world's leading provider of hosted CRM. This is a heady goal considering that Salesforce.com now has more than 120,000 seats and has launched the Winter '04 edition of its solution, adding numerous features, including team sales management and improved workflow tools to the suite. "Salesforce.com has created a market, now the [company] gets to see if it can hold on to it," says Kinikin. The company's customer retention is not as impressive as the raw subscriber numbers, she says. "Salesforce.com is vulnerable if someone else can come in and say 'Not only can we give you this software for $70 per month, but we can help you make it successful.'" "Our customer retention approaches 99 percent, up from the midnineties about a year or so ago," says Cary Fulbright, CSO and senior vice president, new market and brand development, at Salesforce.com. "We've put in place a number of programs to help retain customers. Most of our customer loss has been from customers going out of business." Competitor Salesnet has focused on expanding its reseller channel in recent months to companies with proven success making inroads with the small to midsize companies that traditionally might purchase a one-time, light-duty product such as ACT! or GoldMine. "Salesnet has carved out a niche as being the most flexible and process-centric of the hosted vendors," Kinikin says. "I think Salesnet is in a good position to go after some verticals to try to take CRM to the next level of value." Rather than design a new online product, PeopleSoft has opted to offer professional hosting services for its existing solutions, via either full-service hosting or remote management of customer-premise equipment. While the company is offering solutions for as few as 100 users, Kinikin says that the mid-market is unlikely to be compelled. "People are buying hosted CRM partly because it's different than traditional CRM. PeopleSoft just putting its Web screens up on a server is not going to attract the same kind of interest that a true hosted offering [would.]" But according to Steve Earl, PeopleSoft's director of hosting strategies, its customers are looking for more than just vanilla hosted CRM. "PeopleSoft has been offering hosted CRM solutions since 1999. But we see it more as a process than just a CRM product line," he says, citing the companies offerings in CRM, financials, human capital management, and supply chain management. According to Earl, PeopleSoft customers want to automate and customize their complete business processes, for example order-to-cash. "We support that," he says. Midmarket companies have processes similar to enterprise companies, although the level of customization may not be as much, Earl says, adding that PeopleSoft's approach works will for that set of requirements, as well. Its hosted offering is scalable and can grow with a company, he says. "Our architecture allows people to 'eat in or take out,' if you will," Earl says. "We can support both outcomes." All the hosted solutions aim to help companies do more with their sales forces with less up-front investment. "It's almost like CRM on training wheels," Kinikin says. "Let's just pay for it month-by-month and see how they do. If the sales force hates it, we haven't lost a lot of money."
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