Brian,
The fear that has kept me from purchasing [Siebel]: Oracle and SAP move in with a bundling strategy that incorporates Front Office into their enterprise wide offerings.
Having dominated the market of customers motivated to buy from independent providers, the bad news in my opinion is that your concern is the biggest remaining threat to Siebel. The good news is that it seems to be the only remaining threat.
Though Baan has more than its fair share of problems, add them along side Oracle and SAP. On the other hand, an article in today's Barrons says that IBM has completely given up on its own internal front office initiative.
Having no crystal ball and not being an industry insider, I don't know how things will play out. I do think, though, I can highlight the significant factors:
Siebel's Edge
1) The most important thing going for Siebel is that they have at least a two-year lead on the ERP folks. If those companies continue to experience delays, the lead will increase. Though the mind share that comes with the lead is important, much more important is the reputation for robust functionality that apparently is far beyond anything the ERP guys are putting in front of the customer.
2) Notwithstanding the clashing of his ego with Larry Ellison, Thomas Siebel seems to be extremely focused, something I can't say about the leaders of any of the ERP behemoths. Siebel might be benefitting from the daunting task facing the management teams of the ERP players as they try to continue providing back-office solutions while bringing out supply-chain software and front office software, not to mention middleware that allows all of the products to "talk" to each other. Siebel's decision to focus exclusively on the front office seems to be the right one for the moment.
3) Every time I see a press release about an integrator, it is almost always about their new agreement to run with an independent provider, usually Siebel. I don't ever remember seeing a big press release announcing an agreement to implement front office products for an ERP player.
4) Some customers already using back-office software provided by an ERP player have the fear of being "held hostage," motivating them to purchase from an independent provider such as Siebel.
5) The most optimistic view is to suggest that it's not necessarily bad for Siebel that the ERP players are getting closer to becoming vital players in the market. People holding that view will tell us that the ERP players are helping to grow the size of the market, fueling Siebel's growth even if they lose market share in the process. Like I said, that's the most optimistic view of Siebel's situation vis-a-vis the ERP players.
6) Siebel is already beginning to penetrate the mid-market, especially with its recent agreement to partner with Great Plains, when the ERP players are only at about the same point with the top-tier market and are far away from reaping profits from the mid-tier customers.
ERP's Edge
1) The ERP players already have a huge customer base to whom they should be able to easily sell their front office products. If they have the resources to pick up new customers rather than relying solely on their existing customer, the market penetration could be awesome.
2) Some of the ERP players have greater financial resources. Larry Ellison apparently has about 900 programmers at his disposal.
3) Having built up a high degree of confidence with their ERP provider, some customers don't want to risk taking on a new vendor such as Siebel and adding the complexity of needing middleware (whether it's provided by the front office vendor or a third, independent vendor) to implement their front office solution.
Hope this helps.
It will be worth your while to look up the article in today's Barron's that does a terrific job of discussing the battle between Oracle and Siebel. The only thing it leaves out is that there is reason to think Oracle's claim to have sold $45 million in front office software last quarter is skewed by bundled software; some are wondering if the pricing doesn't allocate a disproportionately large amount of the total cost to the front office modules, making the total front office sales appear to be something they really aren't.
Let me know your thoughts.
--Mike Buckley
P. S. If this post is less cohesive than usual, it might be because I'm distracted by the Orioles' continued creativity in coming up with ways to lose a game in the final innings. |
