Siebel Sets the Pace for CRM Horserace

It's practically impossible to talk about CRM without bringing up Siebel Systems. To its credit, the company came out of nowhere in the mid-1990s and bulldozed its way to the top almost overnight--a feat that hundreds of other SFA vendors were unable to accomplish after years of trying.

During the past 12 months, the industry giant has enjoyed seeing its biggest rivals lose their coveted main-contender positions. While they haven't exactly disappeared, one could say that Baan/Aurum and Vantive have faded back into the CRM woodwork, and in the sales arena today, Siebel stands head-and-shoulders above the rest.

Gartner Group's Michael Maoz agrees. "In terms of market position, there are a lot of other vendors in the sales space, but no one else is even close to Siebel. Vying for the Number 2 position are a plethora of others, some of which are vertical-specific and are more successful than Siebel within their verticals--in the automotive sector, for instance, Siebel doesn't hold a candle to Firepond. But in the overall market for sales applications, Siebel absolutely dominates and will continue to do so over the next three years."

Is Oracle Really Number 2?
What about Oracle? Couldn't it be argued that this huge ERP player has pushed its way into the Number 2 position? Given the extent to which Tom Siebel and Larry Ellison have publicly battled it out, one certainly might think so. (Along those lines, many attendees to the last Boston DCI enjoyed a laugh when Tom got up to give his keynote. With a face full of scrapes and scratches, he stepped up to the podium and jestingly announced to the puzzled crowd, "I ran into Larry Ellison at a bar last night." He attributed his appearance to rough-housing with his son, who--if he's indeed that aggressive--could likely someday supplant his father as Siebel's CEO).

Back to Oracle, though. While the company would like to position itself as the Number 2 player based on revenues, there's a glitch to this line of thinking: Oracle isn't required to break out revenues by sales of its marketing, sales and service apps, meaning it can claim pretty much whatever it wants.] Without these breakouts, points out Maoz, the company's statements as to its size in the CRM market space are meaningless.

So where is Oracle right now? While it has certainly been working to position itself as a major player on the CRM front, the ERP giant must tackle some serious challenges before it can succeed in this new arena. There's still talk that much of the company's CRM solution is little more than vaporware. Beyond that, Maoz notes that Oracle must overcome the skepticism of its own sales force as well as the inexperience of a substantial professional service organization in the business and organizational subtleties of CRM. "Those are the problems and there's no way around them," he asserts. "Oracle must tackle those issues before it can move forward as a serious contender in this space."

Siebel Faces Its Own Challenges
While Siebel may have clenched the top spot for the short term, it has its own challenges to grapple with as well. We've all heard stories of Siebel implementations gone south (not that we haven't heard the same for other vendors in the industry), and rumor has it that this was a big impetus for last year's acquisition of sales methodology vendor OnTarget.

The acquisition made for an interesting surprise, particularly for CRM/methodology vendors who had existing relationships with one of the two companies. Following the announcement, there was definitely some damage control taking place, especially for OnTarget, which had formal relationships with other CRM solution providers including Pivotal, Clarify, and Relavis. How did these firms take the news? "Some vendors were concerned," notes Wendy Lea, a managing partner at OnTarget. "Right now, we're assuring them that we will continue to support them. We very much intend to maintain our relationships with other CRM vendors."

Methodology vendors also felt the punch--many of them share clients with Siebel--but in some ways the punch was more sweet than it was painful. OnTarget sold for seven times its revenues--a tremendous amount in acquisition terms--sending out a strong message about the value of sales methodologies. "After getting an amount like that," jokes Rick Page, whose company, The Complex Sale, is an OnTarget rival, "Alston [Gardner, OnTarget's CEO] ought to be teaching a negotiations course! But seriously, we're excited by the valuation amount. It shows that CRM vendors recognize the importance of using methodology and process to enhance selling tools."

Page is excited on another level as well, since he says that from his perspective, the acquisition effectively polarized the CRM marketplace, driving several of Siebel's competitors to immediately abandon OnTarget and go with The Complex Sale instead. Page says he has already closed several deals with former OnTarget clients as a direct result of the acquisition.

Beyond the surprise element, the announcement was noteworthy on other fronts. "In taking this step," notes Gartner Group's Beth Eisenfeld, "Siebel stepped over the boundary from software to professional services to include sales process training and sales team coaching. That's a big deal, and it will likely benefit clients using the OnTarget methodology." Paul Rosenblum, Siebel's VP of Product Development, obviously agrees. "If one vendor can offer you sales training and the tools to help you implement what you've learned, that's a much more powerful combination than either piece by itself," he says. "It's what our clients said they wanted, so we responded to that need."

But Eisenfeld also adds a note of warning: While tight integration between sales process and software is key to being effective, not all process vendors are alike. "It's critical for companies to evaluate sales methodologies independently of their SFA software decision," she asserts. "Siebel will try to push the combination as a huge selling point, but OnTarget won't be the best methodology solution for every company that chooses to implement Siebel Sales Enterprise."

That said, will the two vendors truly stay agnostic--not pushing each other's products on clients--or will they just pay lip service to the idea? "It's hard to say," notes Yankee Group's Chris Selland. "Certainly, both companies want to offer customers a choice. But when Baan bought Aurum, Aurum said it would continue to support SAP, and we've seen how much that happened. Only time will tell if this situation will be the same."

still, Selland feels that overall, Siebel is headed in the right direction on many fronts. "It's fair to say that Siebel has left some customers less than 100 percent satisfied in the past," he says. "But I think the company is trying to change for the better. As the industry leader, they're realizing that they've got to prove their own track record by doing more to make customers successful."

With a methodology vendor under its umbrella and a stronghold on Slot #1 in the industry, what is the most serious threat for Siebel? According to Maoz, Siebel's biggest challenge may be itself. "Siebel is in the midst of trying to transform itself into an e-business," he explains. "While it's now calling itself an e-biz, that is hope in the face of reality. The Web-based buy-side and sell-side applications do not reside on Siebel today, nor do the e-service suites, the customization or the personalization. Those are the things companies need if they're going to provide an e-business solution, so the risk to Siebel is there. Can Siebel remain relevant? That's the real issue. And in that light, Siebel is its own biggest threat."