However, as it became clear that market entrants such as salesforce.com were using the utility computing CRM model to make increasing headway into the enterprise CRM market, a similar offering from Siebel was inevitable. The only question would be how successfully that service would be implemented.

CRMondemand.com was launched one month ago, primarily in the North American market. It is a joint venture between both IBM and Siebel.

Neil Morgan, Siebel VP Marketing EMEA, describes the nature of the relationship as a partnership of mutually beneficial strengths. “Whilst there are bits they are more focused on and bits we are more focused on, this is a logical partnership...We looked at what would provide people with a convincing offer as an on demand CRM application and felt a partnership with IBM would be a big part of that.

Siebel have done the product engineering ourselves and the intellectual property remains our own. However, there are a couple of key things we’ve done with IBM. The first is to consider how to best build a service that is very scalable to the kind of volumes that we’re thinking of. With their on demand expertise and service centres, they have a lot of experience there.

The second thing is the hosting itself. Our core competence is software engineering. That’s what we’re good at: building applications, not hosting them. We didn’t think it would be compelling to our customers – even possibly a risk to our them – to see Siebel trying to provide that service. With IBM as a leader in that market, they were an obvious partner in that respect as well.

Of course, internally we have quite clean lines as we share both risk and reward with IBM but, overall the partnership is aimed at helping de-risk the decision for people looking to buy the service.”

UC: In general, what are the initial reactions? It’s been a month since launch now.

Neil Morgan: Very good. Our formal launch has so far only been to the US market, with the European launch coming in the next few months. The European language versions of the service will be available in Q1 of 2004. In Europe at present, we’re spending our time educating existing Siebel customers and so far have had several thousand enquires, converting into a large number of opportunities, so are more than pleased with initial response.

It’s too early to say if there is a stronger bias towards different industry groups. Early indications are that it reflects the regular CRM market, with hi tech, financial services, telecommunications and banking (retail and insurance) showing a great deal of interest.

What has taken us by surprise has been the level of interest from existing large-scale enterprise customers. We have ended up in many conversations of late where the customer says “I’ve rolled CRM out to my customer facing heavy users but haven’t in the past rolled it out to my occasional CRM users because it was prohibitive it was just too expensive.” CRMondemand gives these customers a new option.

UC: In a recent letter to customers of recent Siebel acquisition, UpShot, CEO, Thomas Siebel stated that Siebel’s move into the utility computing CRM market was an effort to “serve the market for fast, affordable…solutions.” Is that not Siebel’s traditional market anyway? Who does this new product aim at?

Neil Morgan: Whilst, with our traditional product, we have something aimed at solving the complex problems of enterprise customers, the vast majority of companies view this product set as inaccessible. Looking at what barriers needed to be removed for the SMB market we focused on cost, functionality, complexity and customisation.

We’ve made it very straightforward and put in what we think is the right level of functionality. We’ve designed it to be used without customisation and time to go live can be measured in hours or days, not weeks or months.

We have this line of “CRM for everyone.” Whether they are small, medium or large companies, public or private sector, we want to deliver CRM to them. Siebel 7 Enterprise which has 20 different industry versions may still be the most appropriate solution for many companies. Certainly the market for that hasn’t gone away – Gartner see it as growing at 10% a year – and it will obviously continue to be a large focus for us.

However, there are several analysts in the last few weeks who have already said that it is not an either/or between traditional CRM and hosted CRM applications.

UC: In the long term, do you expect cannibalisation? Can the CRMondemand model scale up to provide the same functionality as Siebel 7?

Neil Morgan: One of the things that is going to be very interesting to watch is the number of new vs existing customers CRMondemand brings. In the US we will shortly announce several household names that are new customers brought in by CRMondemand.

As to the future functionality of CRMondemand, I’m not sure I have an answer to that, although I can tell you what challenges would be. To implement CRM in a company like, for example, British Telecom there so may integration points with their existing environment of the 200 systems that they need their CRM system to interact with that it might be prohibitive to look at only one model. The average customer has a huge amount of existing infrastructure that they want to leverage. Right now we have a pretty good solution for that that we’ve spent years building and I don’t see the model for that changing overnight. I think a large portion of the growth in this will come from other, associated user communities. For example, the sales-force of an insurance company that would want to give a 3^rd party sales force a helpful but restricted view of their business. CRMondemand is probably more appropriate in that situation than the enterprise model.

UC: Can you tell us about the UpShot acquisition. Why did you need UpShot?

Neil Morgan: Well – not what was rumoured after our announcement of CRMondemand, that we realised that we didn’t have a product and needed to buy one. It takes more than a couple of weeks to buy a company like that. It was part of our strategy and, at $70m, an indication of how seriously we are taking this market.

Whereas with our purchase of Scopus some six year ago, we focused on using the technology at first, we now see the benefit of an acquisition strategy as being in the increased depth of experienced people and intellectual property that is brought in. There are over 100 people at UpShot who have been active in this market longer than anyone. They bring a lot that can accelerate entry into this space – not least an existing base of 1000 customers

We really do see this and the whole on demand trend as something that’s going to be huge.