| | SEBL featured in Monday's IBD:
Siebel Challengers Get Stronger
BY J. BONASIA
INVESTOR'S BUSINESS DAILY
Business software maker Siebel Systems Inc. (SEBL) has ruled the customer relationship management roost for years. But the king of CRM faces fresh threats to the throne.
So says a new report by AMR Research Inc. analysts Rod Johnson and Joanie Rufo. Their in-depth study of CRM software packages found that in recent months, rivals SAP AG (SAP), Oracle Corp. (ORCL) and PeopleSoft Inc. (PSFT) have come up with CRM that can compete with Siebel’s.
Siebel pioneered CRM, a category of software it practically invented. Its software is the standard for sales force management, marketing and call centers. These are called front-office applications because the corporate user deals with customers.
For most of the 1990s, SAP, Oracle, PeopleSoft and others focused on software to help companies manage their back-office functions - human resources, accounting and manufacturing. Now many companies want to link back-office and front-office systems.
“The competitive landscape is dramatically changing for Siebel,” Johnson said.
Rufo says Oracle, PeopleSoft and SAP have boosted the quality of their CRM offerings.
“In the past these companies’ products lagged Siebel,” she said. “Now, they all have viable products.”
Front Office, Back Office
Many businesses want to connect back- and front-office systems, says Mark Barrenechea, an Oracle senior vice president. Siebel, he notes, doesn’t make back-office software.
“Customers want business flows. They want to hook up the marketing campaign to the sales cycle to order processing,” he said. “It’s expensive to integrate Siebel to (these) systems.”
Looking at the market as a debate between CRM software vs. full business suites oversimplifies the issue, says Siebel founder and Chief Executive Tom Siebel. In an earnings call on Wednesday, he said large businesses need many types of integration to succeed.
“To suggest that the integration problem is satisfied by just integrating (the back office), CRM and the supply chain is ridiculous,” he said.
Siebel 7, due out by year-end, is the first of the company’s packages to work completely on a Web platform, says Atul Suklikar, director of product marketing. Employees of corporate customers don’t have to maintain any of the applications on their desktop or laptop computers. Instead, they access the product via Web servers.
This change will greatly reduce maintenance and other costs for corporate customers, Suklikar says. “The architecture is the main feature of the new release.”
Indeed, analysts say such a package is much simpler and cheaper to use. Oracle released its Web version last year. SAP is doing the same.
PeopleSoft unveiled its Web-based product in June. Thomson Financial Corp., whose offices were destroyed in the Sept. 11 attack, uses the product. The Web platform may help Thomson, as it lets staff work from various locations.
These moves don’t surprise Siebel Systems. Suklikar says all the major CRM makers have shifted, or are shifting, to Web platforms to stay viable. “This is the cover charge for coming to the party,” he said. “You need an Internet architecture.”
The stakes are high. Morgan Stanley Dean Witter & Co. analyst Charles Phillips says just 13% of the potential $48.6 billion-a-year CRM market has been penetrated. In a September report, he says CRM revenue will rise 15% to 20% each year for the next five years.
Acquisitions Expected
Phillips says Siebel held 55% of the CRM market last year, with $2.7 billion in sales. Oracle and Nortel Networks Corp. (NT) ranked second, with 11% each. PeopleSoft had 9% of the market, followed by SAP with 2%.
Despite the tougher competition, Phillips says Siebel’s share rose to 64% in the first half of this year. Oracle remained at 11%, while PeopleSoft slipped to 4% and SAP rose to 4%. Nortel is leaving the sector.
These numbers aside, Phillips says Siebel no longer has the jump in CRM. The back-office players “weren’t initially convinced of the market opportunity, but have since become believers,” he wrote.
Tom Siebel, though, insists that rivals “can’t get any traction. There’s an interesting cat fight out there over . . . second place,” he said.
Analysts expect a shakeout in the crowded field. AMR’s Johnson says 500 firms are angling for a slice of the CRM pie. “There will be a tremendous thinning of the market in the next couple of years,” he said.
Interact Commerce Corp., Onyx Software Corp. (ONXS) and Pivotal Corp. (PVTL) are midsize firms that sell CRM software, but not complete suites.
Rufo says these three firms have solid software and low stock prices. This makes them potential acquisition targets. Rufo and Johnson expect the leaders to look to buy.
That already began. This month, Siebel Systems said it will buy analytics software maker nQuire Software Inc. of San Mateo, Calif. Its software will help Siebel customers pinpoint buying patterns. |
|
