Tom Siebel, the founder and CEO of Siebel Systems, used to think there was no money to be made from providing customer relationship management (CRM) functionality over the Internet. He tried it once, setting up a subsidiary called Sales.com, but the unit failed to do justice to its name: sales were scarce, and eventually it was killed. “I don’t believe it’s an economically viable business model,” said Siebel in 2002.
Then along came Salesforce.com, the fast-growing CRM application service provider (ASP). At $51 million, Salesforce’s annual revenue is still tiny compared to the mighty Siebel Systems’ $1.4 billion. But a look at the growth of the two companies shows where the market is going. Salesforce’s sales more than doubled in 2003, while Siebel Systems’ top line shrank by 17%. To find new growth, Tom Siebel was forced to embrace the ASP concept again.
Not that his strategy has been without a few hiccups. First, he unveiled Siebel CRM OnDemand and promised that the ASP service would be based on its own technology. Then, within two weeks, he surprised many on-lookers by acquiring CRM specialist UpShot, partly for the ASP’s sales and marketing expertise but mainly to plug gaps in Siebel Systems’ own platform, such as synchronisation with handheld computers and integration with Microsoft Outlook. Most of the rest of UpShot’s platform was discarded.
Ken Rudin, general manager of Siebel CRM OnDemand, has had to face awkward questions ever since. “The main focus [of the purchase] was to gain expertise in the market. We could have tried doing it ourselves, but we wanted to be as successful as possible, as quickly as possible,” he says.
The main reason that Siebel Systems abandoned an otherwise successful ASP platform in UpShot, he says, is because the company wanted to create an ASP product that could be tightly integrated into its flagship Siebel Enterprise software product. This is because one of the main markets that Siebel is pitching the CRM service to is the departmental level of major organisations, particularly those with a Siebel Enterprise implementation.
The service concept will appeal to such organisations, says Rudin, because it will enable them to roll out CRM capabilities to far-flung divisions quickly, without burdening the IT department with a distracting development. Such divisions have often implemented their own CRM packages, something that can lead to one of two problems: either ‘islands of data’, or information on the same customer ends up being held in multiple data stores.
A key advantage of Siebel’s approach, says Rudin, is that the integration with the Enterprise suite means that all staff can work on the same set of customer data. “When you talk to enterprises, the vast majority of them are looking for a hybrid solution,” he says. As a result, Rudin claims that the new service has proved a “deal-clincher” in a number of Enterprise tenders already.
After three years of declining sales, and with a fast-growing upstart to fend off, Siebel Systems hopes its ASP service’s promising start can be sustained.