Siebel has long held the top spot for the software, which automates a company's sales force, allowing them to manage account leads and track client information over the Internet.
On Monday, the database software giant will launch OracleSalesOnline.com, a service that will offer businesses Oracle's core sales force automation software for free. Oracle will charge fees for additional components such as sales compensation software based on a pay-per-use model. Pricing was not disclosed.
In June, Oracle quietly introduced OracleSalesOnline.com. Salesforce.com, an online service started by a former Oracle executive and partly funded by Oracle chief executive Larry Ellison, asked Ellison to resign from its board after the new rival service was detailed.
The move could prompt San Mateo, Calif.-based Siebel, as well as other rivals in the niche market, to offer the typically high-priced enterprise software for free, possibly brewing a heated battle in the business software industry.
"We're creating a challenge to the industry?a challenge to Siebel," said Mark Barrenechea, vice president of Oracle's customer relationship management (CRM) division. "What we're doing for sales force automation is what Hotmail did for email. We're making this a commodity."
CRM software automates and manages a company's sales force, marketing efforts and customer service needs. Barrenechea also said Oracle intends to offer the basic components of its complete suite of CRM software online for free in the near future.
Earlier, Siebel shares dropped just over 9 percent on news of a Lehman Brothers analyst note that cited the upcoming announcement.
Redwood Shores, Calif.-based Oracle has been moving aggressively in the lucrative market, vowing repeatedly that it will soon knock Siebel from its top spot. Analysts have said that it would only be a matter of time before Oracle gained significant momentum in the front-office market and that it has the best chance among its circle of rivals to unseat the market leader.
The company said it already has 300 live customers using the service to date, including auto exchange Covisint, computer maker Compaq and other companies that range from small dot-coms to large, global businesses.