February 9, 2005

Siebel's status as the market leader for CRM (customer relationship management) was, until recently, one of the few enduring certainties of B2B and e-business.

Siebel had tried to go downmarket in the 1990s and failed, but it was still king of the hill. Attacked from below by Salesforce.com and a subsequent flood of hosted sales force automation (SFA) providers, Siebel acquired UpShot and partnered with IBM to offer Siebel OnDemand CRM.

Threatened from above by larger enterprise resource planning (ERP) companies, particularly SAP, Siebel pointed to its huge market share lead and maintained that prospects would choose Siebel's robust functionality over the integration story that the ERP providers told.

So much has changed. SAP, by some accounts, passed Siebel in worldwide market share. Salesforce.com went public and consolidated its reputation as the leading hosted CRM player. Tom Siebel stepped down from his CEO position.

Today, given the dwindling number of enterprise-level CRM prospects in the marketplace, Siebel is spending more and more of its resources to conquer the small and medium-sized business (SMB) segment of CRM and to develop the kinds of cheap, quick-implementation CRM solutions that even some existing enterprise customers prefer to Siebel's full suite.

Siebel OnDemand CRM is the flagship and representative of the company's efforts to re-establish itself at the head of the admittedly changed CRM world. Recently, Forrester Research took a comprehensive look at the product, which at the level of functionality boasts the kind of strength that could provide a rapid boost to Siebel; that said, there are still gaps in both functionality and strategy that Siebel needs to sew up.

Siebel has $1.5 billion in revenues and nearly 3 million end users, but less than 1,000 [largely North American] hosted customers. In its quest to win an ever-increasing number of hosted customers, says Forrester, Siebel has both "vast resources" and a significant "breadth and depth of vertical expertise" on its side. On the high level, that's good news; at a more granular level, too, Forrester finds reasons for Siebel to be optimistic. Let's take a look at these individually.

Product Strengths

*Field-leading analytics, including the finest hosted data warehouse on the market. There are plenty of examples of companies using data warehouses to get real-time information out to customers, for transactional and visibility purposes alike, and the trend is accelerating; this aspect of Siebel OnDemand CRM will be particularly attractive in the higher SMB and midmarket segments.

*Enterprise-caliber setup and customization tools, including sophisticated user management, strong access controls like field-level security, and a sales process coach. Some of these tools have been integrated from the UpShot acquisition.

*Unique ability to offer a hybrid solution -- makes it a good choice for midmarket firms with high growth potential. UAN helps out with the integration here.

*In sales management, Siebel is good at sophisticated partner tracking [and] multitiered account and channel management.

*A help library that lets users know both what they can and can't do, which can save navigation time; also, a search engine with good relevance-based hit return.

*Support options that have helped to lead to 90 percent customer satisfaction.

*Siebel provides a "strong user experience" for sales representatives.

Product Weaknesses

*Wireless support options are limited and expensive. This is a problem for sales and service people in the field, for example.

*Some records (like forecast roll-ups) are updated weekly at best, requiring users to run custom reports for real-time information. Generally, Siebel's analytics can also "burden response time." This is an issue for sales managers and administrators in particular.

*Sales representatives have to manually enter deal sizes.

*Storing (e.g., for reuse on another project) teams of users is not easy.

*Group forecasts are not in real time.

*Hosted SFA players with an earlier entry in the space may be ahead of the curve in some sales management features, like group calendaring.

*Currency conversion doesn't extend to supporting order tracking in multiple currencies. This is an obvious shortcoming for global prospects.

*Siebel doesn't have a play in the lower end of the SMB segment. Salesforce.com, Salesnet, Microsoft, Best Software, and many other rival vendors do.

*Siebel's SMB and vertical expert channel is still relatively weak. This is a global problem, but one that is particularly nagging in Europe, where Siebel OnDemand CRM has very little traction. Given how important partners can be in even the smallest deal, this is a shortfall that Siebel urgently needs to address; knowing this, Siebel has recently undertaken some new partnerships and committed resources to a channel strategy.

The Prognosis

Even as it lists some of these weaknesses, Forrester points out that Siebel has plans to address many of them (e.g., the wireless issue). The company's resources are sufficient to keep improving the product and, now that it has demonstrated the will to go after downmarket business, there are few internal obstacles in the way.

Forrester concludes that Siebel needs to do a better job of marketing itself as not just a high-cost CRM vendor but as an SMB-friendly player; also, it needs to win the "hearts and minds" of channel partners. This will be one of the most important e-business battles Siebel fights in this or any other year.

Source: Line 56