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Siebel aims for start-ups with outsourcing deal

The leading maker of business software that automates sales, services, and marketing functions--inked a deal with Applicast to host Siebel's complete line of software for other start-up companies.

Siebel Systems today announced a new outsourcing deal, this time with start-up Applicast.

As earlier reported, Siebel--the leading maker of business software that automates sales, services, and marketing functions--inked a deal with application service provider (ASP) Applicast to host Siebel's complete line of software for other start-up companies. Siebel already has an existing ASP partnership with USinternetworking to target midsize companies.

The deal comes amid a crop of recent ASP deals. Systems integrator, Nexus recently signed a deal with Exodus, which runs data centers, to host SAP's enterprise applications. German software giant SAP's chief executive Hasso Plattner today said the company plans to pursue more outsourcing opportunities, although the company has no intention of doing the hosting itself--as Oracle does. SAP partners include services giant EDS and telecommunications company Qwest.

Meanwhile, Oracle rents its software through Oracle Business Online and is aggressively moving ahead with its ASP strategy. Business software maker PeopleSoft is also planning to host applications for its customers.

ASPs host business applications for customers at data centers. Outsourcing advocates argue that hosting is a sensible route for small- or midsized businesses that want to use business software but can't afford to install or manage it. The ASP market is expected to grow to $2 billion by 2003, according to market research firm International Data Corporation.

Applicast's CEO John McGrory, who cofounded the 18-month old company, said targeting start-ups that will quickly grow to midsized companies is a smart strategy for Siebel. "There's no such thing as too early anymore," he said.

Under the agreement, start-ups will be able to license the software from Siebel and pay Applicast a monthly fee to host applications, plus a one-time implementation fee to install and configure the software.

Bruce Cleveland, vice president of alliances for Siebel, said the deal will enable the company to target start-ups that are headed for quick growth.

"We see it as a long-term perpetual revenue stream," he said.

A typical price that a start-up will pay to host Siebel's applications ranges from $5,000 per month to $15,000 per month, with an up front, set-up fee of about $50,000 to $150,000, McGrory said. McGrory said Applicast has about 8 live customers using Siebel software, including networking company Cosine Communications, data warehousing developer Acta Software, and bio-imaging company Identix.