CRM: The enterprise is dead – long live the SME

But while relative newcomers like RightNow and Salesforce.com and other players tussle it out to become the de facto hosted CRM player, companies such as Siebel, which has traditionally been exclusively focused on larger fish, are trying to reposition themselves. Last week Siebel launched a marketing offensive to try and build some bridges to smaller firms who until now would have regarded Siebel's CRM software as overly-expensive and overly complex.

"Small to medium-sized organisations have an unmet need for proven, complete CRM solutions that enable them to upgrade from spreadsheets, home-grown contact development tools or legacy software systems they are currently using," says Bruce Cleveland, general manager of Siebel OnDemand and SME.

However, the likes of Salesforce.com and RightNow are understandably threatened by a sleeping giant like Siebel waking up and going after the very customers they have built their businesses on. RightNow's Gianforte claims that not only has Siebel got little or no expertise dealing with small companies, it's also pretty inexperienced when it comes to the whole hosted model for application delivery.  He claims that Siebel's decision to host applications using a third party is an ineffective way of going about the job and the costs accrued involving a middle-man ends up being passed onto customers.

"Siebel is trying to expound is that it is not relevant whether it is the vendor or a third party that hosts the software. Does this mean that Siebel is willing to disclose how much it costs them to use IBM as a hosting partner and how that cost is passed on to its customers?," he says.  "At RightNow hosting is 6 percent of our top line revenue, we rent a pipe and rack space -- that's it, everything else is RightNow, not some third party that maybe doesn't have such an emotional investment in the company's success. This third-party hosting just underlines what we already knew, Siebel is incapable of delivering software outside of a complex ecosystem"

Salesforce.com has been similarly scathing off Siebel's ambitions for the SME market. Phill Robinson, VP of marketing at Salesforce.com Europe, says Siebel does not understand the SME market and doesn't know how to sell to smaller firms

"The major vendors are all starting to exploit the SME opportunity despite having engineered software architectures built for the larger enterprise. Siebel has failed three times over the past five years. What says they'll make it this time?"

Robinson claims that Siebel's channel strategy has always been a "dog's breakfast" and the company doesn't how to partner with other organisations. "What SME's are looking for from CRM is to reduce cost, risk and complexity. Siebel is expensive, difficult to use, over-engineered and fraught with danger," he says.

Siebel however is not the only entrenched software giant throwing its weight around in the CRM market. Microsoft has also staked a claim and is hoping that the tight integration it can offer between its CRM product and its Exchange/Outlook email software will give it an edge in the market.

Jason Nash, UK CRM product manager, Microsoft Business Solutions, says current market conditions demonstrate the need for CRM products built specifically for small and mid-market customers, since scaled-down enterprise products are too complex for the business needs of smaller organisations. "The success of Microsoft CRM, which has achieved 110 customers since its UK launch 12 months ago, can be attributed to a number of elements, but the chief among them has been the heritage of our partner community in delivering products to the SME," he says.

However like Siebel, Microsoft has shied away from hosting applications directly opting instead to use third-parties which in the UK such as Aspective. Aspective recently acquired another Microsoft partner Erudite -- another indication that the hosted CRM market is hotting-up.

"The focus of the CRM market is definitely shifting towards the SME segment," says Javaid Aziz, CEO of Aspective.

But once again RightNow and Salesforce are quick to dismiss Microsoft as a potential competitor. RightNow's Gianforte argues that Microsoft would have to fundamentally alter its business model to compete effectively in the hosted-CRM space.

"They have a lot of resources but the structural impediment they have is that at its heart, this on-demand model is about eliminating infrastructure -- Microsoft's core business is selling infrastructure. To really embrace this model, Microsoft has got to be prepared to cannibalise its core business," he says.

Datamonitor analyst Pringle claims that price, functionality and deployment are the three factors most customers are likely to use to differentiate between the various players in the CRM space. "Key to success here lies in the flexibility of access provided by the vendor. Much in the same way phone operators offer their customers different headsets, tariffs and options within their price plan, vendors of CRM in the SMB market must be similarly flexible," he says.