This summer Siebel Systems, the customer relationship management (CRM) software company, is holding a series of celebratory parties for employees and customers. It was ten years ago that the ambitious Tom Siebel burned his boats with Oracle, his former employer, and founded the company that is the clear number one in its sector.
However, whether all of those employees and clients will be in the party mood is another matter. The company has recently warned Wall Street that second quarter revenues will not only fall short of expectations, but will be some 35% below the same figure a year ago. Siebel is shrinking, and up to 1,000 more jobs could go.
Customer (and analyst) relations seem to be another problem. A series of user surveys has suggested that the software can be difficult and expensive to roll out and, perhaps even more damaging, that it offers little in the way of a fast payback.
The allegations, strongly refuted by the company and some satisfied customers, have hurt Siebel and the wider CRM market. Siebel’s revenue tumbled by 30% in the first quarter of 2003, while new research from analyst group Gartner reveals that licence revenue in the CRM market as a whole fell by one-quarter in 2002, indicating that it is proving harder than ever to attract new customers.
Amid the roughest trading environment in Siebel’s history, executives descended on the company’s recent customer fair in Cannes in the south of France and put on a brave face.
Tom Siebel, even by his pugnacious standards, was in a brazen mood. He was dismissive of research that suggested German rival SAP was gaining ground in the race to lead the CRM market. Gartner still puts Siebel ahead, but the supplier’s lead is shrinking fast – its 18-point advantage over SAP was cut in half in 2002, according to the analyst group.
Tom Siebel thinks SAP is cheating the researchers. “They give it away,” he says, referring to SAP’s practice of bundling CRM with mainstream enterprise resource planning (ERP) software sales. As a result, its market share is being significantly over-stated, he says.
Surprisingly, SAP CEO Henning Kagermann does not refute Siebel’s claims. “About one-third of customers that say they are using MySAP CRM probably aren’t,” admits Kagermann, but he counters that the same might be true of Siebel.
Tom Siebel also brushed off suggestions that customers are unhappy with the company and its products. In a keynote speech to hundreds of European clients, he quoted exhaustively from an internal customer survey that found high levels of satisfaction across all but a handful of categories. Areas receiving bad marks included ‘ease of installation’ and ‘speed of product’.
Later, he criticised a controversial but widely reported 2002 study by Nucleus Research, which found seemingly high levels of dissatisfaction among Siebel’s reference customers. It had been based on an “unsound methodology” and was “fundamentally flawed”, he said.
Some observers found the rhetoric a little too strong. But Tom Siebel and his colleagues were on firmer ground with the audience when they discussed the company’s well-received integration technology, called the Universal Application Network (UAN), and its efforts to move beyond CRM into the burgeoning markets for employee management and partner management software.
Sales of Siebel’s employee relationship management software, for example, are growing rapidly. New customer wins include the state of Florida, which is rolling out the software to more than 200,000 users.
However, most important of all is UAN. Analysts see this as Siebel’s last big chance to regain its star status. UAN, says Siebel, makes it easier and cheaper for companies to link their Siebel CRM customer systems with SAP financials, for example.
This could help cut some of the competitive advantage enjoyed by the all-in-one ERP software suppliers, particularly SAP and Oracle.
Meanwhile, Siebel is investing more than $500 million in a parallel development effort with IBM and Microsoft. As part of the unlikely collaboration, IBM and Microsoft will incorporate UAN into their own integration products, while Siebel promises to build future versions of its software suite to run on both J2EE and Microsoft’s .Net platform.
Supporting two code-bases, as Siebel plans to do, could be a costly option for the company and it could be 2005 before these alliances begin to bear fruit, say analysts. Meanwhile, SAP is sticking with a single version of its products and adapting them for compatibility with J2EE and .Net.
All the time, Siebel Systems’ market share is slipping. By the time its UAN projects deliver real benefits to Siebel, the long-time frontrunner in the CRM market may be playing catch-up.