uf...'NetTrends: Tiny Salesforce.com takes on titan Siebel'
By Lisa Baertlein
<<SAN FRANCISCO, April 25 (Reuters) - Siebel Systems Inc. (NASDAQ:SEBL) is the undisputed king of the customer-service software industry, but Marc Benioff, founder and chairman of Salesforce.com, a San Francisco start-up, wants to topple the industry giant.
Siebel Systems' domain is customer relationship management (CRM) software, a fast-growing business that helps companies build market share and reap higher profits by making selling and customer service more efficient and effective.
Benioff -- who's no slouch at 6-feet-5 -- sells a simpler, online product for a fraction of Siebel's cost and says he's beginning to make inroads with the big corporations that helped Siebel book sales of $1.8 billion last year.
Battle cries like Benioff's are commonplace in Silicon Valley, where innovation and competition trump conventions like loyalty and reverence, and are part of the noise emitted as new companies try to steal away markets that gave rise to technology titans.
Benioff, 36, is a former top salesman at Oracle Corp. (NASDAQ:ORCL) who's no stranger to Siebel Systems. He made a fortune off his early investment in the company, which was started by former Oracle colleague Tom Siebel.
When Salesforce.com was just a twinkle in Benioff's eye, Tom Siebel offered to pull the nascent company into his fast-growing software house and make Benioff an executive. Benioff declined and set out to woo Siebel's customers.
TAKING AIM
Salesforce.com started selling hosted CRM for $50 per user, per month in March 2000. In its early days, the company's biggest customer was Blue Martini Software Inc. (NASDAQ:BLUE) with 15 online users. Six months ago, its biggest customer boasted 100 users. Today, three of Salesforce.com's 2,300 paying customers -- including software maker MicroStrategy Inc. (NASDAQ:MSTR) -- have 500 people online.
Other customers include Siemens Power Transmission & Distribution Inc., Thomas Cook Global and Financial Services, Putnam Lovell Securities, Reliant Energy Communications Inc., and e-business software maker BroadVision Inc. (NASDAQ:BVSN)
"We believe we'll have a company with 1,000 users by July this year," Benioff told Reuters.
"For the first time in the history of Siebel Systems, there is a viable alternative."
Tom Siebel, however, balks at that notion.
"The chance of that business being an ongoing concern is about zero. There's no way that company exists in a year," said Siebel, who evoked such failed dot-com companies as Pets.com and eToys Inc. Just last week Siebel Systems told customers it would shutter Sales.com, its Web-based salesforce automation service, this summer.
CRM NOW
Benioff, however, isn't alone in eyeing Siebel's market. Big software concerns like Oracle, PeopleSoft Inc. (NASDAQ:PSFT) and SAP AG (SAPG) are stepping up efforts in a big way, while upstart hosted service providers like UpShot, Neteos, Talisma, Salesnet and NetLedger are angling for a piece of the fast-growing space, where sales are expected to grow from $14.4 billion this year to $24 billion in 2003, according to industry research firm the Aberdeen Group.
While the flagging U.S. economy is being blamed for a slowdown in business at large as well as small software shops, Benioff said it has been a boon for his company. Revenues have increased 40 percent since Jan. 1, the company's Japan operations are taking off, its average customer pays between $2,500 and $5,000 monthly, and the company expects to show a profit within nine months, he said.
"Economic realities are going to make some companies make different choices. Those companies that gotta have it (CRM) are going to look at the ASP (application service provider) model," said Denis Pombriant research director at the Aberdeen Group.
Setting up a Siebel CRM system can run into six figures when companies tally the cost of hardware and software, consulting fees and user training programs.
Such costs were a key consideration for Mike Bauer, vice president of northern regional sales for Siemens Power Transmission and Distribution, a North Carolina-based operating company of German technology titan Siemens AG (SIEGn).
"We looked at Siebel and others. We kept on looking because of the up-front costs," said Bauer, who put eight people on Salesforce.com at the beginning of last year and has since increased that number to 50.
"I set it up and configured it in a day. It works good. It's easy. It's intuitive and our IT (information technology) guys never got involved," Bauer said.
Peter Bernard, vice president of products and marketing for San Francisco Web-based image supplier eColor said he chucked his Siebel installation when it was 85 percent complete because he could not get it to sync with the server, realized it was the wrong technology for the size of his small company and was loath to hire a full-time Siebel sales consultant.
"It was a fairly expensive mistake. I would estimate we are out of pocket $20,000. Our feeling was that if we went with Salesforce and it didn't work, we wouldn't be out as much," Bernard said.
80/20 RULE
Customers said Salesforce.com offers about 80 percent of Siebel's functionality at about 20 percent of the cost.
"You have to live within the limitations they've set and if you're willing to live within that, it's good," said Rodric O'Connor, vice president of technology at Putnam Lovell Securities, who added that the toughest part about getting Salesforce.com running was cleaning up the data the investment bank was using as the backbone of its CRM system.
Michael DeSimone, vice president of e-commerce with Thomas Cook Global and Financial Services, uses the service to link 30 sales representatives, who are scattered from South America to Canada and share information via the Web.
"This was like a godsend. I struggle to find things I don't like about it," DeSimone said.
When asked to look into the future, industry analysts predicted that the delivery of business software via the Web -- with its ease of use, mobility and instant upgrades -- would eventually overtake or, at least, compete on equal footing with hardware and software intensive systems like those now sold by Siebel Systems and others.
"I think that is where the industry is headed," said Joe Outlaw, a research director at the Gartner Group, who added that Siebel isn't likely to go quietly.
When it happens, Outlaw said, "Siebel will be there.">> |
