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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Grantcw who wrote (1812)	5/8/1999 11:02:00 PM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Grant, I'm always happy to discuss Siebel Systems in the context of this folder. Thanks for asking! O.K., the market is growing at a rapid clip, so Siebel is in a tornado. They are also the leader in the tornado. I'd be interested in why you think it's in a tornado. There are no hard and fast definitions of a tornado, but I don't think we're quite there yet. There haven't been any companies operating in any sector of the front office market showing consistent 25% or more quarterly growth for three or four quarters in a row. (On the surface, Siebel's revenue increased that rapidly but only because the acquisition of Scopus increased revenue dramatically. The combined revenues of Scopus and Siebel measured before and after the acquisition don't show signs of an indisputable tornado.) Excusing me for digressing, but this part of our discussion leads to an important point that I might not be very popular for bringing to light. From what I can tell, Geof Moore has said that only certain vertical markets (mostly telecom and financial services)have experienced tornado-like growth. First, that confirms for me that we're still in the bowling alley. Second, and MUCH more important, he recently said that Silicon Valley execs have conceded Siebel as the gorilla of the front office. If that's the case, Siebel is the first company to become a gorilla without going through a tornado. The reason I don't buy it? The data suggests the tornado hasn't gone full-fledged and the book very clearly says that though all tornados don't produce gorillas, all gorillas come from tornados. OK, now that I've got that off my chest ... :) Who sells the software? The Siebel sales force, integrators and other software partners. Very recently we are beginning to see the new industry of Application Software Providers (ASPs) promoting Siebel's products. ASPs outsource einterprise-wide software in return for a monthly rental fee. Or does Siebel sell the software and implement it themselves? Siebel will on a rare occasion implement the software themselves when the customer demands it. But it's not the common business model. Are other software developers making products that work better/only with Siebel's? Off the top of my head, I can't think of any products I can document that work exclusively with Siebel's products. Because Siebel's software is a proprietary architecture, the final version of a product might be tweaked and thus might be unique to the extent that it successfully integrates with Siebel's proprietary architecture. But to get to the essence of the issue you raise, I don't think Siebel negotiates any sort of exclusivity with its premier partners. You raise an interesting point. In other value chains, do companies create products to work exclusively with the leader in a market segment? If so, what are the similiarities and dissimilarities with the current front office business environment? What exactly makes [Siebel] take the leap to a Gorilla? I really prefer that you ask the simple questions, not the hard ones like that one. :) For me, one of the great criteria of a gorilla is that it can raise or lower prices at will. I'm not sure Siebel is there yet, but they sure don't have any problem competing against much lower priced competition. Oracle had a so-called 50%-off sale to Scopus users, hoping to get them to migrate from Siebel to Oracle. I assume it didn't yiels great results or we would have heard about it from Oracle. Siebel's reputation is that they really don't try to compete on the basis of price. Beyond that, Siebel's ascendency to gorilladom might be more a matter of their competitors continuing to have problems and losing ground, as opposed to Siebel doing anything differently than what it is currently doing. The clear difference between Siebel and its lessor competitors is that it is the only leading independent front office software company that hasn't stumbled in a big way. Clarify seems to be recovering well from a horrendous problem integrating an acquisition a couple of years ago. Vantive is changing the focus of the company for the second time in three years and just dumped its founding CEO. Both are far behind Siebel when you compare licensing revenue, the most important measure of a front office software company. In that context, maybe the issue isn't about understanding what will propel Siebel to gorilladom. Maybe the issue is about understanding at what point it is virtually impossible for Clarify, Vantive or one of the advancing ERP players to become a gorilla. I will be very surprised if the front office space doesn't produce a gorilla. I hope my rambling as been somewhat helpful. Your thoughts? --Mike Buckley