Grant,
You asked about Siebel's gorilla-like qualities and the size of the CRM market.
Siebel
A synopsis of the gorilla-like qualities of Siebel Systems is pretty simple. It's got the proprietary architecture (their front office software suite) and a value chain that adds new links practically every week. In the most recent quarter, Siebel had more than twice the licensing revenue of the next two leading independent competitors COMBINED. Current revenue growth is in range of 50%.
The balance sheet looks like a classic gorilla except for the net margins. There's no debt. Lots of cash. Gross margins in excess of 80%. Without doing a lot of number crunching using SEC filings, I estimate that the trailing net margin excluding one-time charges is about 13%. Operating and net margins are expected to improve. The Q1 net margin is already 14%.
I've been following roughly the top seven or eight front office companies since 1997. Though most of them have had their share of fundamental problems at one time or another in the last few years, Siebel is one of the few that hasn't. When Siebel acquired Scopus, it was important because it was the first (and remains the only) front office company to acquire another leading front office company. Siebel absorbed Scopus, the company and the technology, seemingly without a hitch.
Thomas Siebel has his eye on the ball. Consider what he said long before The Gorilla Game was published. "If you look at software markets - whether it's relational, database, spreadsheet, operating system, or whatever, the No. 1 company will have between 50% and 60% market share. No. 2 will have 12% to 15% market share."
Unquestionably, it is his goal to acquire and maintain that 50% to 60% share.
When I came upon that quote, his company's trailing revenues was $54 million, about 17% of the market at the time (extrapolated as best as I could from estimates by Aberdeen.) I wrote to some friends at the time that "it's not out of the question that it could capture 22% by 1999, or $154 million in sales. That's a three-fold increase in just two years." We now know that Siebel will likely have about $600 million in 1999 revenues.
The CRM Market
It's really difficult to get a handle on the size of the CRM market. There are literally hundreds of small, privately held companies competing in it. Additionally, there are many different sectors within the market and, for some reason, no two competitors or research firms like to use the same name to refer to the market they are describing. As an example, Customer Relation Management (CRM) is being used a lot lately thanks I think to Siebel's leadership role. But Customer Interaction Software (CIS) is also a phrase that is used, I think, to describe the same market.
In January I came across the folowing quote referring simply to the front office software market: "A study by AMR Research in Boston predicts that the front-office software market will reach $11.5 billion in the next four years, up from $1.2 billion last year."
That's a ten-fold increase in five years, a 57% annual increase. In December, Thomas Siebel was quoted in Upside that Forrester Research expects the market to grow 54% annually for the next few years. 'Nuff said? :)
Back to Siebel
Armed with that information, we know that Siebel already had about 33% of the front office market in 1998. ($391 million in sales divided by Aberdeen's estimated market size of $1.2 billion.)
Hope this helps. In the mean time, your question about the market reminds me that my information is getting out of date. I'm gonna see if I can find something more recent.
--Mike Buckley |
