Newfound Faith: Oracle Upgrades Its CRM Software-As-A-Service Offering

Oracle CEO Larry Ellison, in a conference call with financial analysts last fall, summed up the company's predicament vis-à-vis the software-as-a-service model. SaaS is "very interesting," Ellison noted, "but so far, no one has figured out how to make any money at it."

Well, at least the conventional software titans haven't. But that's not stopping Oracle from giving it the old college try. Momentum for SaaS, particularly for CRM, continues to build, prompting renewed efforts from Oracle in a market dominated by Salesforce.com. Oracle will release a new version of its Siebel CRM On Demand next month, only eight months after a full upgrade of the offering.

There's good reason: The on-demand CRM sector will grow at a 26% compound annual clip, Gartner predicts, reaching $2.5 billion by 2011.

Siebel CRM On Demand languished under Oracle after the company's $5.8 billion purchase of Siebel Systems in January 2006, with no major upgrades for 18 months. Gartner analyst Robert Desisto, in a report last year, blamed that neglect for a 75% reduction in inquiries for competitive evaluations of the product.

Siebel CRM On Demand Release 15, to be announced March 11, includes Web 2.0 features that support what Oracle calls "social CRM." The release includes integration of RSS feeds directly into applications and the ability to tap into social networking sites. That means, for example, that a salesperson could get news feeds for content relating to customers and receive alerts when a customer makes a change to his or her profile at business and social networking sites, says Anthony Lye, Oracle's senior VP of CRM products. The upgrade also includes improvements to how users make and share notes on customer records, to help avoid slips in communication on hot leads, accounts, and service requests.

The improvements in last summer's Release 14 included a nifty in-line editing feature and better integration with other Oracle apps. Oracle offers an integration pack for linking Siebel CRM On Demand with a customer's on-premises Oracle E-Business Suite, and in the coming year will release integration packs for its Siebel and JD Edwards on-premises apps as well, says Oracle VP Jose Lazares.

Oracle will market Siebel CRM On Demand to large companies, Lye says, while rival SAP pursues only small and midsize companies with its new Business ByDesign SaaS applications. "SaaS has expanded the market by opening up CRM to a whole new set of industries that want something lighter-weight and easier to use," he says, citing wealth management, construction, consulting, and other areas where the "professional relationship is far more social" than transaction-based industries such as telecom and retail banking. Oracle counts among its SaaS customers Accenture, General Electric, Ingersoll Rand, Kodak, and 3M, but it won't divulge numbers of users at customer sites.

Salesforce's largest customer is Japan Post, which has licensed about 40,000 seats of the CRM vendor's subscription service; Merrill Lynch has about 25,000 seats. Last week, Salesforce reported fourth-quarter revenue of $217 million, up 50% from the same quarter a year ago. By contrast, for its entire line of On Demand services, which includes hardware and software hosting services, Oracle reported revenue of $167 million for its fiscal second quarter ended Nov. 31, up from $140 million in the year-ago quarter. Oracle says Siebel CRM On Demand accounted for 10% of that growth.