By David Sims
[email protected]

The news as of the first coffee this morning, and the music is The Definitive Collection: Patsy Cline. First Coffee^SM had wondered why she remains so popular, but now realizes she never sings a line that a guy wouldn’t want to hear a girl say to him:

Thanks to salesforce.com’s CEO Marc Benioff for sending First Coffee^SM some info [read: riposte] regarding Siebel VP Bruce Cleveland’s letter referenced in yesterday’s column.

“Regarding some of the points made in Cleveland’s note,” he writes, “He said: ‘Siebel Systems has added more than 500,000 “live” users of its CRM applications since the beginning of 2005, while salesforce.com has added approximately 100,000 subscribers.’

“However, apples-to-apples, Siebel added only 11,000 subscribers to its on demand product in the same period, and has a signed up a total of 39,000 subscribers over the last few years, compared to salesforce.com’s 308,000 at the end of Q2.

“IDC estimates salesforce.com’s share of the on demand CRM market at more than 50 percent, compared to Siebel’s 14 percent.”

That’s always the sticky wicket with these two: Of course Siebel’s the bigger overall CRM company, but when you focus just on the hosted market, salesforce.com’s bigger. Now can we all agree on that and move on?

“Cleveland’s note alluded to a press release that said over 100 companies have switched from salesforce.com to NetSuite,” Benioff continues. “What the press release actually said was: ‘To date, more than 100 companies have switched from salesforce.com and other legacy accounting applications such as Intacct, Great Plains, QuickBooks and Peachtree to gain the cost savings and productivity benefits of NetSuite’s One System for CRM, ERP and Ecommerce.’”

Benioff also included First Albany’s analyst report on Oracle’s takeover of Siebel. The analyst, Nitin Doke, writes that the move will have “little impact near term as SEBL’s OnDemand offerings may take a backseat while ORCL focuses on big revenue generators for Project Fusion.”

On a conference call “yesterday morning [Sept. 12],” Doke writes, “ORCL stated that it will invest heavily in SEBL’s OnDemand offerings and that it was ‘one of the key motivators for us to do the deal.’ On the one hand, one could argue that SEBL’s OnDemand product is now placed into the distribution muscle of a software giant with a massive global footprint, and this could enhance the uptake of the SEBL OnDemand platform.”

This jibes with what Cleveland said in his letter, that Larry Ellison had committed himself to investing in Siebel. However, Doke writes, “Why would ORCL focus resources on the small OnDemand product line, with very little associated revenue? Near term, we see little adverse impact for salesforce.com.”

There’s also a question of whether Oracle’s interested in paying royalties to IBM for the use of the middleware and DB2 databases Siebel uses for their OnDemand product. Transitioning over to Oracle stuff while it’s operative would be a difficult feat to pull off. Nevertheless First Coffee^SM believes Larry Ellison when he says he has no plans to axe OnDemand, or that Oracle Co-President [sic] Charles Phillips is talking through his hat when he says OnDemand is “one of the jewels of the acquisition.”

Few thought Siebel’s on demand CRM product would throw salesforce.com out of business and chase Marc Benioff back to mai-tais on Maui, certainly salesforce.com is the 800-pound gorilla in the room when it comes to on-demand CRM, with RightNow Technologies and NetSuite already in the field anybody would have had a hard time racking up significant numbers, and actually 14 percent of the market’s pretty good, given the late ramp-up Siebel had.

It also points up the fact that while Benioff can claim a moral victory over the company he personally wanted to beat the most – between Siebel and salesforce.com it was always personal – he hasn’t lost his most formidable competition for the years ahead. He might not be “running scared,” as Cleveland suggested, but he knows there be monsters here.

Few figured Siebel would swagger in hosted CRM and take over the show. There’s nothing but respect from First Coffee^SM for how hard they worked at it, however, and as all great competitors need someone to push them – Evert and Navratilova, Bird and Magic, Frazier and Ali, the Beatles and the Stones – Siebel certainly pushed salesforce.com to be better.

Yet their failure to make much more of a dent than that bodes ill for the other big boys looking to piece off some of the market – SAP and Microsoft especially. If Siebel, arguably the legacy vendor best positioned to succeed in on demand couldn’t do it, who else would you bet on?

If all Microsoft’s huffing and puffing can’t blow down Intuit’s house, for heaven’s sake, they have no chance against a trio of well-established, smart and trusted vendors in hosted CRM, especially when they’re having such a struggle defining their own CRM identity.

The simple fact is that the on-demand market’s too small to warrant the sort of major cultural revolution at a place like SAP or Microsoft would have to have. To succeed in on-demand CRM they’d have to gut profitable operations, shift significant internal resources, irritate currently profitable partners and irk Wall Street, all for the opportunity to lose lots of money for the foreseeable future in the hosted CRM space with no guarantees. That’s not something First Coffee^SM sees them as willing to do.

It’d be like Tom Cruise turning his back on Hollywood and $20 million paydays for a couple months’ work on the next Mission: Impossible installment to work his way up to become the biggest star on Broadway and make $75,000 a week in The Producers.

Not that the on-demand CRM market is chump change – First Coffee^SM would take $75,000 a week, in case anyone was considering offering. Benioff’s clearly looking beyond it with the announcement of AppForce last week, and he’s said that CRM was a way to start, not an ending point for him and his company.

No, hosted CRM isn’t Hollywood, it’s not the be-all and end-all of the business software world, it might be too small a market for SAP and Microsoft – and, soon, maybe for salesforce.com as well – but for those who want to be there, it’s still a great place to be.
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Correction: Yesterday First Coffee^SM called San Jose the largest American city without a major pro sports franchise. A reader from San Francisco wrote in to point out that there is, in fact, the San Jose Sharks of the National Hockey League.

Plain fact is, First Coffee^SM simply forgot about the Sharks, who started out as a really cool logo in search of a team, but is hockey a “major sport” in the United States? Word is the NHL isn’t on strike anymore, but did anybody south of Buffalo care when they went on strike or notice that now they’re not on ice but back on ice? (Rim shot)

According to a recent Harris poll 30 percent of Americans say pro football is their favorite sport. After that there’s a huge drop-off to baseball and college football at 15 and 11 percent, then men’s pro basketball and men’s college basketball statistically intermingled with auto racing.