InformationWeek
Defining The Business Value Of Technology
February 14, 2000
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Siebel, Clarify, Vantive, and Oracle flourish, with more rapid growth ahead
By Jeff Sweat
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s companies focus on serving their customers, customer-relationship management software vendors are experiencing enormous growth. AMR Research predicts the CRM market will hit $5.42 billion in 2000--and will keep growing at an annual rate of nearly 50%. Many front-office vendors are already ahead of that pace, and there's plenty of room to run: Most analysts estimate the front-office market has reached only 5% of potential customers.
Siebel Systems
"It's hard to imagine how we could be doing better," says Howard Graham, Siebel Systems Inc.'s CFO. The world's largest CRM vendor is growing at a heart-pumping pace. In its 1999 fourth quarter, Siebel grew 109% over the same quarter in 1998--not unheard of in a market full of eager startups, but stunning when it's posting quarterly revenue figures of $268 million.
Profits grew even faster, rising 127% to $45 million over the year-ago quarter, and the company posted annual revenue of $790.7 million, up 93% from its 1998 total. Net income was $122.1 million, a 116% increase over 1998.
Surprisingly, in an increasingly crowded market, Siebel seems to have benefited from a lack of competition. "Our traditional competition has been sidelined by acquisitions," Graham says. That has left Siebel with unrestricted access to customers while its competitors sort out new business structures and strategies, analysts say. And the integrated application threat from enterprise resource planning vendors Oracle and SAP loomed over Siebel all year but failed to materialize.
But the company faces challenges. Its E-commerce products, introduced last year, are still rudimentary. "They weren't really built as an E-commerce kind of company. They have to deal with that," says Peggy Menconi, an analyst at AMR Research. Siebel's heritage is as a sales-force automation vendor, and that's still where its strength lies. Menconi says the vendor could work on E-commerce functionality such as order fulfillment, and she predicts Siebel will buy an E-business vendor to deal with those needs.
Siebel's biggest threat, however, comes from within: It has to learn to handle its success. "The biggest concern we have is managing this level of growth," Graham says. Siebel raised its head count in 1999 from 1,400 to 3,200, a pace that brings plenty of integration difficulties--but they're problems other CRM vendors would love to have.
Clarify
Clarify Inc. certainly gets points for originality. The company was snapped up by Nortel Networks Ltd., the multibillion-dollar networking company, in October, giving Clarify an opportunity to take CRM in a different direction.
"We want to leverage Nortel's communication infrastructure. We want to address more than just an integrated CRM suite," says Clarify CEO Tony Zingale. What that means for customers, he says, is CRM combined with Nortel technology for voice over IP, wireless networks, handheld devices, and advanced telephony. Zingale says he's already seeing customer demand for such technology, as well as for the traditional call centers that underpin CRM.
Clarify expects to release two major products this year. The first will focus on thin-client applications and support for multimedia; the second will exploit the Nortel technology.
Analysts say Nortel and Clarify may not be an odd fit: There's a natural synergy between the two since Clarify historically has had a strong call-center offering, says AMR's Menconi. Nortel's installed base will provide an enormous number of prospects for Clarify's products, and Nortel salespeople already understand the importance of CRM, especially as it revolves around the call center, which Menconi says will be the core of most of the companies' front-office sales.
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