Midmarket customers might also embrace the content expertise that's built into UAN's vertical business processes. The first thing the midmarket wants is simplicity, says Skip Bacon, VP of technology at Siebel. "The second thing they're looking for is content expertise," he says. "They want prescriptive software to help them set up service accounts and such."

Siebel says about a quarter of its customers are midmarket companies, but two years ago it shut down a hosted offering called Sales.com that primarily targeted that market. Since then, companies such as Salesforce.com, Salesnet, and Upshot have appeared on the scene and gained traction with customers that want to get going quickly on CRM, without committing a lot of money and resources.

Now Siebel is trying again with an offering specifically designed for the Web and aiming the Siebel CRM On Demand service it launched two weeks ago in partnership with IBM not just at smaller companies but also at divisions of larger enterprises. A recent survey conducted by Aberdeen and CRM information portal RealMarket found that 85% of 156 technology-related executives--about a third of whom were from companies with 500 or more employees--would consider using a hosted CRM service. The hosted software offers functionality for sales, marketing, and customer service, and Siebel's Schmaier says it "will be the first and only CRM solution to offer hosted, on-premise, or a combination of both." For instance, a company with an in-house CRM system might want to deploy a hosted system at field or overseas offices that integrates with its on-site system at headquarters.

The service will be available for a monthly subscription of $70 per user and offered as pay-as-you-go, yearly, or multiyear contracts. It's expected to be profitable in 2004, Tom Siebel says.

Certainly, hosting CRM apps holds a draw for a growing number of companies. Take Sovereign Bank, a financial institution with approximately 530 community banking offices. Bill Patten, director of sales and policy administration, lived through a $1 million-plus Siebel implementation at his previous place of employment but chose a hosted system from Salesnet for Sovereign. "For my money, the process of selling ought to be straightforward and simple," he says. "The idea of having data live on the Internet, available and accessible, and not having to spend 12 to 15 months designing and customizing software" is attractive. Before the decision was made, Patten says, Sovereign looked at Siebel's applications. He acknowledges Siebel's prowess, but he prefers that his company focus on selling and servicing customers rather than spending a lot of time building and maintaining a CRM infrastructure.

Dan Starr, Salesnet's chief marketing officer, says Siebel's move makes him wonder "what does it do to their license revenue stream, and if they really have a business model to sustain those prices." But Siebel says it's not cannibalizing itself with this offering, and some analysts agree it's smart business.

"As a go-forward proposition, the revenues [Siebel] realizes from a hosted solution will be a very good complement and balance for what is a more volatile revenue stream from licensing," Aberdeen's Pombriant says. License revenue fluctuates each quarter, but "with hosting, you get to smooth out that curve. That's important to folks on Wall Street."

Wall Street isn't calling all the shots, though. It's going to be up to customers to decide if Siebel is headed in the right direction. The man who founded the company 10 years ago believes it is. Says Siebel, "We have the CRM products for anyone, any size company, and provide it anywhere, any way."