Across the board, large enterprise business application vendors have seen licence sales under pressure, with deals taking longer to close and average transaction size having slipped for many vendors to half of the level seen two or three years ago, writes Fran Howarth of Bloor Research.
Many customers have been burnt by long implementations that run over time and over budget and are now turning their attention to smaller implementations to address specific points of pain.
Of all the applications companies can implement - including supply chain management, professional services automation, human resources and financials management - customer relationship management has got some bad press over recent years for failing to provide the benefits and return on investment levels promised.
And the benefits available are not even as large as for some other applications - almost 50 per cent of companies' revenues are spent on goods and services purchased, so whatever amount is cut from the bottom line through use of automated supply chain management and supplier relationship management applications will translate directly to increased profits. Not so for customer relationship management where, for a company operating with a 10% profit margin, sales revenues will have to be increased by ten times the amount that is cut through more efficient procurement to achieve the same benefit.
And that's not the end of the story. Whilst some of these applications are extremely complex, especially supply chain management technologies, customer relationship management is not. Much of the functionality offered through customer relationship management technology is really pretty straightforward.
This makes customer relationship management especially ripe for being offered as a hosted application - unless your company thinks that running a call centre equates to customer service and wants the larger, on-premise application. Salesforce.com showed us how to do it and has taken a significant lead in the provision of hosted applications.
But then, Salesforce.com never intended to be labelled purely as a customer relationship management provider - instead, it built a hosted applications platform and developed a customer relationship management application to prove that the platform worked and because this application is easier than most others.
Another company, Onyx, is also paving the way with its 'embedded CRM' story, offering customer relationship management applications in a web services environment.
So what of Siebel's CRM OnDemand offering? This represents a re-architecture of its premise-based product and provides a much more intuitive, easy to use front end. Working on the same data model, the CRM OnDemand offering integrates seamlessly with its premise-based offering, allowing it to push its new offering to branch offices and subsidiaries of its existing clients. Siebel will also benefit from the enormous marketing clout of its go-to-market partner IBM.
This is not the first time that Siebel has come out with a hosted offering. Back in 1999 it introduced a hosted offering written in a client-server environment, but this offering lasted only a couple of years before it was taken off the market. In the meantime, other companies have moved to capitalise on the gap in the market and have gained market share.
There seems to be a rare consensus among analysts following Siebel's CRM OnDemand announcement that while it is a good product, it is most likely to be successful among those companies that already have a Siebel deployment in place - and some potential customers are likely to choose the new hosted version, rather than fork out for an all-singing-and-dancing on-premise version of a software that does more than they really need. This is especially so since Siebel has made its hosted version available backed up by analytics capabilities.
Siebel has really made this move because it was forced to compete with the newer players on the market to protect its market share. It needs now to work hard on bringing the usability of its in-house version of the software up to scratch if it to avoid shooting itself in the foot by cannibalising that sales channel.
During an announcement call of this new initiative, Siebel went out of its way to rubbish its competitors, especially PeopleSoft and Oracle. That is behaviour we more normally expect to see from Oracle and is not a strategy that will resonate with customers.
Try it for yourself. Siebel is offering a free 30-day trial of the software. My guess is that, unless your company is labouring under the illusion that customer relationship management is more complicated than it really is, you probably won't need anything else.