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Siebel Acquisition May Signal Death Of Traditional CRM

The implications of Oracle's $5.85 billion acquisition of Siebel Systems are unmistakable: It may mean the end of the best-of-breed market for customer-relationship-management software that Siebel created.

Siebel's model--in which customers bought highly complex CRM apps and underwent exhaustive integration efforts to connect them with other systems--has fallen out of favor with some businesses in the past few years. Instead, they're getting CRM as part of an applications suite from vendors such as SAP, Oracle, and Microsoft, and as a subscription service from fast-growing competitors such as Salesforce.com. "We may have just eliminated the middle model," says Woody Griggs, a managing partner in the CRM practice at systems integrator Accenture, about the Siebel acquisition.

Meanwhile, at Salesforce.com's user conference yesterday, CEO Marc Benioff adopted a glass-half-full approach to the market development. "It was the greatest gift we could have ever received from (Oracle chairman) Larry Ellison," says Benioff, who used the acquisition news as fodder for wisecrack material throughout the opening day of the conference, being held in San Francisco.

Yet another market development is Salesforce's plans to launch a marketplace for on-demand business apps called AppExchange. The company also previewed its Winter '06 release, which will let customers choose from multiple interfaces, provide better offline capabilities for working with data remotely, and introduce a host of new features ranging from territory management to customizable forecasting.

AppExchange is intended to vastly increase the tools available to Salesforce customers by allowing developers to build more components and then upload them to an open-source-like exchange, where other customers could pluck them for use in their own Salesforce environments. Some developers expect to charge for their apps, while others will make them available for free in the hope that it will spur business.

One company taking the latter approach is SmartStore, a marketing automation vendor that used Salesforce's Sforce development tools to build a miniapplication that integrates a Salesforce contact list with an on-demand, custom-mailings service. SmartStore has been using the app internally to do things like quickly send greeting cards to sales prospects from its collateral fulfillment house, and figured the service might be of use to other Salesforce customers, too. The app will be available on AppExchange as soon as the winter Salesforce release goes live, sometime in the fourth quarter, and SmartStore is prepared to ramp up its fulfillment operation to meet the new demand.

The prospect of being able to do more with their Salesforce subscriptions proved tantalizing to customers attending the conference. Wes Benwick, CEO of Bennett's Business Systems, which sells copiers, scanners, and document-management systems, says that once all the necessary apps are available on AppExchange, he plans to run his whole company on Salesforce, which would mean expanding his subscription from 30 seats to 75 seats. "They'll get me to do that in a heartbeat," Benwick says. "I wouldn't even hesitate."

 

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