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Win, Place, and Show: Oracle Spreads Its Application Hosting Bets

Last week, Oracle took the wraps off a new managed CRM service for Siebel. But doesn’t Oracle already market a Siebel CRM On Demand service? Yep...

• By Stephen Swoyer
• November 1, 2006

Database kingpin Oracle Corp. isn’t exactly new to the software-as-a-service (SaaS) arena. Oracle has pushed its own managed database hosting services for several years now, and it also inherited a dedicated SaaS practice with the acquisition of the former Siebel Systems Inc. last October.

But at last week’s OpenWorld confab, Oracle took the wraps off of a new managed CRM service for Siebel, dubbed Oracle On Demand for Siebel CRM. When is a managed CRM service not a SaaS offering? When it can scale to support tens or even hundreds of thousands of users, for one thing—or when it comes with a $300,000 annual commitment, for good measure.

Oracle’s managed Siebel CRM offering isn’t exactly a shot out of the dark. For one thing, Siebel announced its own SaaS entry (CRM On Demand) three years ago this month, shortly after Salesforce.com started demonstrably eating into its revenues. Which begs an important question: how is Oracle’s new SaaS entry any different from Siebel CRM On Demand? The devil—or upside, as it were—is in the details, says Robert Bois, a research director with consultancy AMR Research. More to the point, Bois notes, Oracle’s On Demand for Siebel CRM is actually a hosted version of Siebel’s on-premises software.

“While Siebel had already built the multi-tenant Seibel CRM On Demand service through a prior partnership with IBM, Oracle stated its intent to also host the on-premises Siebel CRM suite in its own hosting environment,” he explains. “While it has taken three quarters to get the service to market, for their wait, customers got a two-for with the addition of a service for PeopleSoft.”

That said, Bois acknowledges, there’s the possibility—indeed, the inevitability—of confusion between Oracle’s two hosted CRM offerings. There really shouldn’t be, he argues: Oracle’s new On Demand for Siebel CRM isn’t a SaaS offering at all, properly speaking: it’s a managed application, much closer in fact to the old application service provider (ASP) model than to the SaaS paradigm. That being said, the pricing of Oracle On Demand for Siebel CRM is similar to that of other SaaS offerings—which isn’t necessarily surprising, as SaaS essentially emerged as a refinement of the ASP model.

“Although this is not true SaaS from a deployment standpoint, the pricing is much like the SaaS model,” continues Bois. “There is no startup fee outside of standard professional services for business consulting, and customers pay a monthly subscription priced by the number of users.”

On the other hand, Oracle clearly isn’t positioning On Demand for Siebel CRM as a service for just anyone. Customers will have to pony up $150 per user per month per product to subscribe to the service—and Oracle plans to charge a $300,000 minimum annual fee. Call it the Cadillac of SaaS or ASP offerings.

“[T]he offering is really appropriate for instances of more than 200 users. For buyers looking to smaller or departmental deployments, quicker implementations, and more basic functionality, the SaaS service is more appropriate, and has no minimum annual fee,” Bois points out.

The biggest difference between the two offerings might be one of scale: while SaaS solutions can support thousands of simultaneous users, Oracle’s new On Demand for Siebel CRM offering promises to go far beyond that. “True SaaS can scale down to just a few users, or up to thousands at the same monthly user fee. The new Oracle On Demand set really just targets hundreds or thousands of users, given the costs associated with deploying a new instance for each customer. While Oracle doesn’t charge an upfront setup fee, the costs are rolled into the monthly fee,” Bois points out.

In this respect, he suggests, there’s a strong case to be made for each offering: the new managed service helps reduce deployment costs along with risk, which, Bois points out, are the most frequently cited benefits of SaaS. “The model also overcomes any lingering apprehension organizations may still have about sharing their data on the same instance as other companies.”

On the other hand, Oracle isn’t doing itself any favors by pursuing a confusing branding strategy. “[T]he true multi-tenant SaaS CRM On Demand product acquired from Siebel is now called Siebel CRM On Demand, while the single-tenant managed applications in this announcement are called On Demand for Siebel CRM and PeopleSoft Enterprise On Demand,” he concludes. “The naming conventions lack consistency, which can be particularly challenging for an emerging delivery model still somewhat cryptic to many prospective buyers.”