Want CNET to notify you of price drops and the latest stories?

Salesforce.com launch presages Siebel rivalry

A David-and-Goliath battle of the Silicon Valley sort may begin heating up with tonight's launch party.

Kim Girard
Kim Girard has written about business and technology for more than a decade, as an editor at CNET News.com, senior writer at Business 2.0 magazine and online writer at Red Herring. As a freelancer, she's written for publications including Fast Company, CIO and Berkeley's Haas School of Business. She also assisted Business Week's Peter Burrows with his 2003 book Backfire, which covered the travails of controversial Hewlett-Packard CEO Carly Fiorina. An avid cook, she's blogged about the joy of cheap wine and thinks about food most days in ways some find obsessive.
Kim Girard
2 min read
A David-and-Goliath battle of the Silicon Valley sort is expected to heat up with tonight's launch party for Salesforce.com.

Chief executive Marc Benioff has big plans for the San Francisco company, which could one day go head to head with software giant Siebel Systems. Salesforce.com's new Web-based service gives salespeople tools to track leads and customer account information, build reports and compare their performance to the rest of the sales force.

The difference between the two companies? Salesforce.com, founded in March 1999, is strictly an online service that customers buy---priced at about $50 a month for the first five users and $50 a month per each additional user--and access using a browser. The company's motto is "The end of software." Siebel, though partners with application service providers (ASPs) that will host the company's software for customers wishing to use the Web, principally makes client-server software which runs on desktop computers.

Any upcoming battle between the two companies underscores a larger argument within the software industry: How quickly will business customers be willing to shift from buying to renting? The stakes could be high. The software universe ranges from such "back-office" applications as financial and accounting software to sales tracking to simple desktop applications such as word processing, email and calendaring.

Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Berkeley, Calif., said Siebel's market share is impressive, though not guaranteed. "Siebel has a lot of traction but that paradigm is vulnerable," he said.

Benioff is banking that the simplicity and low cost of the company's service will trump the complexity of Siebel's client-server product. But to take on Siebel will be no easy task in a Siebel-dominated market that analyst firm AMR Research projects will reach $16.8 billion by 2003.

Siebel, a Wall Street darling, has an established base of Fortune 500 clients, including Dell, Charles Schwab, Kellogg's, GTE and Bank of America; a high-power reseller deal with IBM; and a market value of $22.57 billion. Its two main competitors, Vantive and Clarify, have been gobbled up by larger companies. And while SAP and Oracle are trying to break into Siebel's market, they've only just begun to nip at its market share.

Ironically, both Siebel and Benioff are former Oracle executives. Oracle CEO Larry Ellison himself is an investor in Salesforce.com, along with Hambrecht & Quist founder William Hambrecht and CNET CEO Halsey Minor. (CNET is the publisher of News.com.)

Siebel and Benioff had initially discussed launching a Siebel subsidiary together, yet the deal never panned out, according to published reports. Siebel has since launched Sales.com, a Web site that offers information and software tools, but is not a full-service Web site for salespeople's client-tracking needs.

Greenbaum said that the market is still young, with no company reaching a coveted goal of tying all customer data together from lead generation to the sale through shipping and customer service. "Siebel is doing really well but his model is vulnerable," he said. "If the models are vulnerable than anything goes."