The World According to Tom

Tom Siebel has a right to be agitated. His company's stock is trading closer to its 52-week low than to its high, such enterprise software vendors as SAP are claiming big CRM revenue gains that he believes to be inflated, and many paint him as the poster child for what is wrong with the CRM industry. But Siebel begs to differ. The man who practically started the CRM industry back in 1993 believes his company is delivering what customers really want in a CRM application, and balks at those who say offering an integrated CRM/ERP enterprise solution is the only way to be successful selling CRM in the future. And if you really want to get his ire up, just mention Salesforce.com and its boastful claims of customer wins from Siebel defections. Siebel addressed all these issues in a recent exclusive interview with CRM magazine Editor-in-Chief Elliot Markowitz. CRM: You have been branded by some as the king of the customer. Are you comfortable with that status? Tom Siebel: No, I am not comfortable with that. King implies some sort of hierarchical relationship. If anything, I feel like I have put myself in a position where I am subordinate to the customer. Literally, the king of customer would be somebody who is in charge, and that is not me. I have a focus on delivering the best practices of products and services to allow people to deliver the highest quality customer service. CRM: Do you consider yourself the founder of the CRM industry as we know it today? Siebel: I believe that it is a true statement that before we started this business the CRM industry was nascent. There wasn't much going on. I believe we have provided some leadership in the CRM industry. I think we had something to do with the direction of the industry. CRM: Siebel is still the number one market leader, however SAP appears to have picked up a lot of ground. Who do you consider to be your biggest competitors? Siebel: We look at everybody all the time. This is the kind of situation where only the strong are going to survive, and although we are running as fast as we can and as hard as we can, we are looking over our shoulders at all times. It is very clear in the space of sales, marketing, and customer service that we have a pretty significant leadership position. And it is clear that we see from many of these companies the numbers that they announce--whether it is Oracle, whether it is PeopleSoft, whether it is SAP--they tend to target us in most cases, with the exception of PeopleSoft, as their number one competitor. We're really not focused on competitors. We are focused on [the fact that] I don't need to be the largest software company in the world, I don't need to be the largest enterprise application software company in the world. We are just focused on building great products and focused on making our customers happy. And however big we are is however big we are. But I understand that strategy has worked out pretty well, and I think in virtually every aspect of CRM and in every segment of the industry we have a main market position. CRM: True, but you can't deny the inroads made by SAP. Siebel: Well, you have to look at how it is measured. [SAP] is not 50 percent of our size in CRM. No way. Let's be very clear here. Virtually every dollar of license revenue I sell is CRM, and it gets recorded as such. There is no other way to count it. What SAP does is, SAP is selling upgrades to R3 called mySAP.com. The company gives an upgrade to mySAP so you have your manufacturing systems and you upgrade to mySAP.com. When you do that you pay a fee. You get the CRM stuff for free. SAP then makes an arbitrary allocation of whatever it wants and says this much of it is CRM. The customer didn't want it and didn't pay for it. No money changed hands, but under that measurement you're giving them market share credit for it. The customer didn't intend to use it, it was just on the table. So there are no accounting standards that will support that particular market share claim that they are making. It's just not true. CRM: What about Oracle? Siebel: It's the same game Oracle used to play about 24 months ago. The company was making all of these grandiose claims on its CRM revenue. Oracle was upgrading its customers to Oracle System 11 and giving the CRM stuff for free, and then making an arbitrary allocation saying this much of it was CRM although the customer didn't pay for it. So this is the same game SAP is playing. CRM: Do you believe the hosting model for CRM like the one promoted by Salesforce.com is a threat to vendors like Siebel? Siebel: They're not in my consideration as a competitor. I believe I have never encountered them competitively in nine years. And I am absolutely satisfied that they do not have a viable business model. CRM: Why is that? Siebel: Virtually every company that has based its business model on [this whole ASP idea of remote applications] has gone out of business. Corio, US Internetworking...some of these companies lost billions of dollars in market valuation. Virtually every one of these companies has closed their doors. We were actually a leader in offering our product through that form factor, where you can buy the month, and the productization of it was called SiebelNet. You pay per user, per month. You didn't have to buy any software. You didn't install any software. And you could do it through the outsourcer of your choice. We had arrangements with AT&T. We had arrangements with US Internetworking. We had arrangements with Corio. And we allowed customers to buy applications in that form factor if they so desired it. But the fact of the matter is, it is not the way they wanted to do it. When you get into their data about their customers, their revenue forecasts, their customer support data, their customer success information, I believe [companies] are pretty darn reticent to entrust that information to a third party. There is not one example of this outsourcing application business model being successful. I just don't think it is a viable business model. CRM: Everyone talks about the integrated enterprise and SAP and PeopleSoft's ERP roots and how that is a plus, whereas Siebel is considered more of a pure-play CRM vendor. Do you agree with this line of thinking? Siebel: Yes. CRM: Is that a strength or a weakness for Siebel? Siebel: It's a strength. What we are focused on is building the world's best products in the areas of sales, marketing, and customer service. In the same period of time Oracle, SAP, and PeopleSoft have said, "What the world wants is an integrated set of applications and that is what we are going to offer." My CRM offering today is more than all of Oracle's application software. My CRM is more than twice as large as PeopleSoft's integrated software in terms of what it sells. My CRM sales, I would estimate, are 20 to 50 times what SAP's CRM sales are. So that whole integrated software approach, while it makes an interesting argument, understand that PeopleSoft's products have been in the market since 1993, but Oracle and SAP's integrated families of software have been in the market since 1995 and have not been very successful. So here we are now, seven, eight years later and Oracle doesn't have one large-scale CRM user live any place in the world. SAP doesn't have one, large scale, live CRM customer that I am aware of anywhere in the world. And yet Siebel has some of the largest customers in the world up live, productive, happy--IBM, Charles Schwab, General Electric, Hewlett-Packard, Compaq, you name it--with thousands and thousands and thousands of users. So that strategy has not worked very well for them. There is no market for integrated application software. There is a market for accounting solutions. There is a market for HR solutions. There is a market for manufacturing solutions. And there is certainly a market for sales, marketing, and customer service solutions. But people are not going to buy integrated software. It is never going to happen. There is not a market there. CRM: Has the CRM industry unjustly earned a bad reputation? And have things improved over the past few months? Siebel: Well, when we got into the market in 1993 there was not a successful CRM implementation any place in the world. And there are still lots and lots of failed implementations today. That being said, I don't think you can find a Siebel customer that has not been successful. Now I am not just focusing on CRM as a category, I am focusing on Siebel customers and making sure they are successful, and we have seen the highest levels of customer satisfaction in the information technology industry. I do think that it is true that most CRM implementations fail and it is true that virtually all Siebel CRM implementations succeed and that kind of works to my advantage.