OK, so I was half-right. Last column, I asserted that Siebel, if it wanted to remain viable in the fast-consolidating CRM marketplace, would soon need to begin getting aggressive on the acquisition trail. And get aggressive it has -– having filled the most critical hole in its product line with the recent acquisition of UpShot.
Siebel, of course, had already announced its entrance to the hosted CRM market with its CRM OnDemand offering. And, of course, it had entered and exited the market in the late '90s with Sales.com. But with UpShot, its time-to-market (see, even vendors care about this!) is substantially reduced. With one acquisition, Siebel moves into a solid No. 2 position in a key market growth segment. Nice move.
For the enterprise software industry, the rise of hosted solutions such as those from Salesforce.com and UpShot is Innovator's Dilemma 101. Hosted solutions, since they are delivered as a service, represent an entirely different business model from traditional on-site enterprise applications. They've proved hugely popular with end users, particularly in CRM. Siebel may have written off this segment in the past –- but so what? The company has recognized, correctly, that it needs to be there now.
Hosted systems aren't for everyone
It's critical to note, however, that while the popularity of hosted CRM is straightforward (and well-publicized) – the attraction is based on lower financial risk and faster
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time-to-benefit –-
there are significant (less-publicized) drawbacks as well. As Reservoir Partners recently detailed
in our report titled "Hosted CRM: Beyond SFA," hosted solutions are much more difficult to
integrate and customize than traditional on-site enterprise software. These systems, in many ways,
pose a danger of returning companies to the same problem CRM was designed to solve in the first
place: creating departmental and fragmented "stovepipes" of data, which prevent development of a
true "360 degree view of the customer." (A view, I should note, that I often compare to the Loch
Ness Monster –- much discussed, seldom seen.)
So, if hosted solutions are right for some, traditional enterprise software for others –- including different parts of the same company –- what to do? Why, combine the best of both, of course. And what vendor now stands in the best position to do just that? Siebel, of course.
In theory, the development of hosted solutions will allow Siebel to more rapidly deploy mixed implementations for its customers. These mixed solutions can allow autonomous departments that can't or won't wait for traditional enterprise software deployments to gain the fast time-to-benefit they require, without compromising the need for a common data infrastructure that is needed to truly recognize the value of CRM.
The real question is whether this type of strategy will work -– and whether it will sell. It's a great marketing pitch, but will companies really buy UpShot over, say, Salesforce.com, just to unify their data model? Some may –- others won't.
To me, in some ways it sounds like the arguments that DEC and IBM were making at the advent of the PC era. The argument was that these newfangled, lightweight toys (PCs then, hosted solutions now) will never replace the heavy iron (VAXes and mainframes then, enterprise applications now). It made logical sense, but the customers never bought into the grand unified theory.
If the same thing happens here -– and I suspect it will -– then Siebel's re-entry into the hosted CRM market will be less about creating mixed deployments than it will be about cannibalizing its own business before the competition does it for them. To Siebel's credit, either way this was a move the company needed to make. From here, what happens is up to the customers.
This was first published in November 2003
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