In a move that could generate formidable competition for application service providers (ASPs) targeting the midmarket, IBM Corp. and Onyx Software Corp. have launched a joint service providing hosted CRM.
The effort represents a first step in Armonk, N.Y.-based IBM's drive to offer low-cost, "on-demand" services to customers in the midmarket for enterprise applications. The service can reportedly be implemented in 30 days or less, for a setup charge of $100,000 and a monthly fee of $150 per user.
IBM will provide infrastructure, hosting centers, applications management and support, as well as business consulting services around the package. IBM has hosted specific, customized online deployments of Onyx CRM during the last year, but for only a handful of customers.
For Onyx, which is based in Bellevue, Wash., the partnership stands as a strike back at online CRM providers such as San Francisco-based Salesforce.com and Boston-based Salesnet Inc., ASPs that have increasingly moved in on the software maker's midmarket sweet spot. Perhaps the most compelling aspect of the new offering is that it offers users the ability to look at the hosted service as a first step toward a more customizable internal CRM system. The offering utilizes the same architecture present in Onyx's traditional, non-hosted CRM software.
Eben Frankenberg, vice president of business development at Onyx, said that companies currently considering a hosted service as a first step
"[Users] can start with CRM on demand, customize it, and always have the option of going to a custom hosted solution or traditional solution," he said.
"Rather than start from scratch, users can take everything they've already accomplished and bring it in-house."
Frankenberg pointed to research indicating that human resistance to change remains the greatest stumbling block to achieving success with CRM, and he claimed that the ability to move upstream without retraining users or undergoing complex data migration serves as a major advantage.
Industry watchers observed that the partnership should appeal to customers and aid Onyx in re-establishing its reputation as a contender in the upper midmarket. Sheryl Kingstone, program manager at researcher Yankee Group, based in Boston, said that the clear migration path to traditional internal CRM should help bring on board users that have yet to embrace the hosted model. However, Kingstone noted that the two companies' ability to keep down pricing for related IT services will play a large role in the offering's success.
"This is exactly what buyers are looking for in a comfort level; with a hosted CRM service, organizations can start light and move up," she said. "Having the pathway to Onyx's traditional CRM products is a big advantage, as users can potentially test out business process before they try to bring it in-house."
Kingstone said she expects the joint IBM-Onyx package to compete alongside other hosted CRM tools, as well as with traditional applications from providers as large as enterprise specialist Siebel Systems Inc. and even Microsoft Corp., on the low end of the midmarket.
Scott Nelson, a vice president at Stamford, Conn.-based researcher Gartner Inc., said he remains skeptical of the desire by hosted CRM users to move upstream into traditional applications, but he said the move should bode well for Onyx's credibility.
"It is interesting to see Onyx go into the midmarket openly, after all they've said about competing at the enterprise level, but I think they've delivered a good message to users here," he said. "It should really help them compete with the ASP crowd."
Both IBM and Onyx will market the hosted offering, with plans that call for IBM to begin selling through third-party channel partners later this year. While the service is already being offered to customers, general availability of the package will come in May, according to Onyx officials.
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