Hosted apps vendors clash over the great ASP debate

What started as a cute marketing slogan -- "Just say no to software" -- may turn out to be a self-fulfilling prophecy. The herd of CRM and ERP ASPs is growing stronger not only in services and features but also in number of customers. And as the herd grows stronger, it's fissuring over whether customers are best served by specialized, industry-specific applications or the tools to customize hosted services for their particular needs.

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In an exclusive to InfoWorld, Siebel Systems revealed that it will unveil an on-demand version of its UAN (Universal Application Network) platform later this year. UAN for OnDemand, now in trials, will officially become available this fall, said Keith Raffel, group vice president of products at Siebel CRM OnDemand.

"With UAN for OnDemand you can integrate with SAP or Oracle right down to Quickbooks, and we will host it," Raffel said.

UAN is the moniker for Siebel's integration platform, which, according to Raffel, does more than just connect applications to the Siebel infrastructure. UAN offers prebuilt connections to applications that can be reused and will speed deployment.

Siebel's plans come as a counter to Salesforce.com, which earlier this month upped the ASP ante by previewing Multiforce, a so-called multitasking technology due in June that will allow customers to run simultaneous on-demand applications on the Salesforce.com site. In addition, because the solutions are built on sforce they share the same data, security model, and interface.

With the release of sforce, Customforce, and now Multiforce, Salesforce.com is taking the view that, for the most part, companies do not need industry-specific applications and would rather customize in-house. To that end, Salesforce.com offers a customization toolbox with Customforce and exposes its APIs through sforce.

But Siebel's Raffel said that Salesforce.com is running against the tide and that companies are demanding industry-specific solutions.

Blending both sides of the argument, NetSuite last Thursday detailed NetFlex, a platform for customizing NetSuite applications. Earlier this month the company also released a vertical application, NetCRM-Services Edition, tailored for accounting, medical, and other professional services.

"Our strategy is to provide some core functionalities and then make it so customers have to do as little customization as possible," said Zach Nelson, NetSuite CEO.

Regardless of the ASP, customization carries a price tag. The tools and ability to customize even hosted applications requires a costly upgrade and hiring new IT personnel, both of which counter the original intent of subscribing to an ASP.

GuildQuality, a provider of customer-satisfaction surveying for builders, uses NetSuite but also maintains a Salesforce.com account, "for posterity's sake, because we don't want to leave it behind," said CEO Gregory Hanson.

Hanson explained that just subscribing to the customization tools and features would have required significant upgrades and other expenses.

"We didn't want to have to hire an engineer," Hanson said.

Liz Herbert, an analyst at Forrester Research, said that Salesforce.com is starting to address the trend is for industry-specific applications.

"The OEM deal Salesforce.com made this [month] with Thomson [Financial] will build a vertical-specific version of Salesforce.com. Thomson CRM is a pre-integrated desktop for wealth managers with single sign-on and a built-in-house holding object for tracking a household rather than a person," she said.

Siebel's Raffel counters that argument by saying Siebel delivers complete solutions to its customers, whereas Salesforce.com offers a toolkit and list of VARs, and makes customers work out the details.

Herbert believes the answer lies somewhere in-between. Although industry-specific solutions are the model du jour, they only take you about 90 percent of the way.

"Even companies in the same industry using industry-specific applications need strong customization tools," Herbert said.

According to GuildQuality's Hanson, another downside to using vertical applications, rather than customizing your own, is that companies, GuildQuality included, are forced to meld their business processes, flows, and operations to the software instead of tapping technology that meets the needs of the business.

"Our whole business grew up around the ASP model. The culture for that started on Day 1, so we're used to it," Hanson said. "It's dubious to suggest that every company can take advantage of the ASP model. The potential is there, but it's hard."

To that end, Siebel claims it has a formidable advantage over Salesforce.com in Siebel's on-premise solutions, which offer applications that go beyond the three pillars of CRM: marketing, sales, and service. The combination of on-premise and on-demand gives customers a hybrid solution that allows them to mix and match both platforms to their needs.

Siebel is bringing many of its on-premise industry-specific apps to the on-demand platform. Currently Siebel offers on-demand solutions for financial services, life sciences, high tech, and automotive industries. Those four cover about 50 percent of Siebel's business, Raffel said.

Salesforce.com, though, has lofty goals. "Multiforce will extend the range of Salesforce.com's vision of on-demand computing from running CRM to powering all of a business' on-demand applications," said Phillip Robinson, senior vice president at Salesforce.com.

Siebel customer Boise Cascade always knew it would opt for on-demand instead of on-premise because of the price differential, said Bruce Swanson, director of information services at Boise Cascade. Swanson said Siebel's configurability was also a strong selling point.

Rather than having ASP code customizations, configurability lets a company decide how it implements the application. For example, the company sets the order of the fields, the field names, and the contents of drop-down menus, and it can set files to be read-only for certain employees.

"The questions in our decision criteria we asked were, 'Is this a configurable application? Can we change its configuration to more closely represent our business model?'" Swanson said.

Epiphany, a CRM vendor whose customers include Citibank, Gap, Microsoft, and Nestlé, offers a variation of the on-premise model using a component-based SOA (service-oriented architecture).

According to Jon Miller, vice president of product marketing at Epiphany, the debate about hosted vs. on-premise obfuscates the real problem: how to integrate customer data scattered across dozens, if not hundreds, of systems into a single view.

When "you are looking at a mass integration effort to connect to 800 different systems, there is no magic way to do this for Siebel, Salesforce.com, or us. It is an enterprise-integration project. It is simplistic for anyone to think it is not going to take a long time or it is not challenging," Miller explained.

The Epiphany argument says if you want a single view of the customer,  you can use its component-based SOA, which allows customers to plug in and connect to all their legacy systems rather than migrating everything to a new platform.

While these vendors slug it out, Herbert warns not to forget about Microsoft, which will release Version 2 of its CRM solution by year's end.

"In CRM Microsoft has a strong hold on the user interface with Outlook and Excel, and users can access their CRM application through those applications," Herbert said.

Will Microsoft have an on-demand offering? Herbert put that very question to Microsoft officials. "They were pretty vague," she said.