Feb 26, 2008 (10:02 AM EST)
Oracle To Boost SaaS Efforts With Upgraded Siebel CRM On Demand

Read the Original Article at InformationWeek

Oracle CEO Larry Ellison, in a conference call with financial analysts last fall, candidly summed up traditional software companies' predicament with the software-as-a-service model. SaaS is "very interesting," Ellison noted, "but so far, no one has figured out how to make any money at it."

That isn't stopping Oracle from giving it the old college try. Momentum for SaaS -- particularly in the area of customer-relationship management -- continues to build, prompting new efforts from Oracle in a market dominated by Salesforce.com. Oracle next month will release a new version of Siebel CRM On Demand, following a full upgrade eight months ago.

The two upgrades signal new efforts by Oracle to keep Siebel On Demand competitive and relevant. The offering seemed to languish under Oracle's ownership, with no major upgrades to the product for 18 months, following its $5.8 billion purchase of Siebel in January 2006.

Siebel CRM On Demand Release 15, to be announced March 11, includes Web 2.0 features that support what Oracle calls "social CRM." The release includes integration of RSS feeds directly into applications and the ability to tap into social networking sites. That means, for example, that a salesperson could get news feeds for content relating to customers, and receive alerts when a customer makes a change to his or her profile at business and social networking sites, such as a new job role or employer, said Anthony Lye, Oracle's senior VP of CRM products. The upgrade also includes improvements to how users make and share notes on customer records, to help avoid slips in communications on hot leads, accounts, and service requests. Oracle plans to release further details of Release 15 within a few weeks.

Oracle is clearly working to keep Siebel On Demand relevant. Gartner analyst Robert Desisto reported last June that Gartner had seen a 75% reduction in inquiries for competitive evaluations involving the product. Desisto blamed waning interest on Oracle's negligence of the product as it focused on higher priority projects, such as its Application Integration Architecture and its upcoming Fusion applications.

The improvements in last summer's Release 14 -- such as a nifty in-line editing feature and better integration with other Oracle apps -- signaled that Oracle was starting to put more effort into Siebel On Demand, Desisto noted. Oracle offers an AIA integration pack for linking Siebel On Demand with a customer's on premise Oracle E-business Suite. In the coming year Oracle will release integration packs for customers' on-premise Siebel and JD Edwards apps, said Jose Lazares, VP of AIA at Oracle.

Oracle's strategy for CRM SaaS, meanwhile, differs considerably from its top competitor in business applications. It will continue to focus selling efforts at large companies, Lye said, while SAP pursues the small and midsize market with its new Business ByDesign SaaS applications. "Larry [Ellison] is very concise about our strategy: Oracle serves the largest companies in the world," Lye said. There's good reason Oracle wants a current and competitive offering: Gartner predicts a 26% compound annual growth rate for on-demand CRM, with it becoming a $2.5 billion market by 2011.

But don't expect any proclamations about the life-changing impact of SaaS from Oracle. Lye calls it a by-product of network innovation; simply a delivery alternative for customers, or divisions within companies that require a simpler CRM capability.

The on-premise version of Siebel, he added, is favored by transaction-based industries such as telecommunications, insurance, and retail banking. "SaaS has expanded the market by opening up CRM to a whole new set of industries who want something lighter weight and easier to use," he said, including wealth management, construction, consulting, and other areas where the "professional relationship is far more social" than transaction-based industries. SaaS customers, such as Accenture, "would never deploy complex call centers and the field service apps [on-premise] Siebel is known for," Lye said.

Cleary, Oracle intends to keep selling those on-premise software licenses to its core customers, and limit the $70 and $120 monthly per-seat rental fees for Siebel On Demand to a smaller subset of customers. Overall, Oracle ranks as CRM market leader, according to IDC, with some five million seats of CRM apps (mostly on premise) installed.

But even as the market leader, Oracle lost some momentum in 2006, the last full-year report from IDC. Oracle's customer service CRM apps business totaled $581.8 million in 2006, down 10.2% from the previous year, while No. 2 SAP's market share was up 11.9% to $322.5 million. In sales automation CRM apps, Oracle grossed $583.5 million in 2006, down 1.4%, while SAP's revenues were up 13.6% to $460.6 million, and Salesforce.com's were up 61.6% to $375.6 million.