Siebel lets software become a service
Published: 26 May 2004 11:20 BST
The new reality
Siebel may have picked a great time to make its move. According to a forecast released on Tuesday by market researcher IDC, the prevailing method of selling software -- offering a perpetual license to a package of software, as Siebel has traditionally done -- is in decline. At the same time, selling software subscriptions -- the Salesforce model being one example -- will grow.
IDC predicted that sales of software sold through subscription licensing will grow at a 16.6 percent annual clip from 2003 through 2008 to reach $43bn, while the traditional system of perpetual licenses will see a drop each year of 0.3 percent.
The subscription model offers advantages for software companies and their customers, IDC said.
"Subscription models help vendors increase the predictability of their software revenues, making it easier to demonstrate future health," Amy Konary, programme manager for IDC's pricing, licensing and delivery service, said in a statement. "Customers enjoy the low up-front cost of the subscription model and the ability to build an ongoing relationship with the software provider that they pay on an ongoing basis."
An earlier IDC survey of 100 vendors found that 43 of them expect a majority of their sales to be on a subscription basis in six years. Customers have tended to overbuy software under perpetual licensing, but are unwilling to do so in the uncertain economic climate. They are increasingly looking at software as a service.
Smaller customers especially tend to gravitate toward the hosted service, Schmaier said. Among Siebel OnDemand customers are Merced Systems, eTelecare, SupportSoft and the World's Finest Resorts.
These smaller companies generally need basic CRM functions, Schmaier said. Hosted CRM is gradually getting more sophisticated, though, with increasingly elaborate "analytics" -- the ability to extract useful trends from customer information.
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