Down But Not Out

More than the economy has taken its toll on Siebel. But it has a plan to turn things around.
The issue got more attention last week, after InformationWeek and others were leaked 12 pages of an internal Siebel customer survey from mid-2002 that concluded Siebel 7 was vulnerable to competition, particularly in the areas of speed and price, and that satisfaction fell for almost all Siebel 7 modules compared with version 6. Siebel says the comments were taken out of context. "We don't just sit there and pat ourselves on the back," says David Schmaier, executive VP of products and marketing. Overall satisfaction now is high, Schmaier says, and complaints with Siebel 7 were mostly because of customers' unfamiliarity with what they'd get in the new architecture. Any serious performance issues were fixed in version 7.5, he says.

Health-care provider Lumenos Inc. backs that up. It prepared extensively for the upgrade about a year ago, says chief technology officer Chad Pomeroy, and suffered only minor performance problems, all fixed with 7.5.

Still, Siebel is confronting a market in which buyers want smaller, faster, and cheaper engagements. Siebel has to learn to survive on "far fewer $10 million contracts," analyst Johnson says. It hopes to do that with two new releases, one due this summer and one later in the year or early next year, that reduce total cost of ownership by lowering maintenance and implementation costs, Schmaier says.

Siebel executives won't comment on rumors that it's planning to offer hosted applications (an earlier attempt failed), but it might do well to pursue them. Barbara Kogen, director of sales training and development at Avis Rent A Car System Inc., says she recently chose Inc.'s hosted apps because she could get them up and running quickly with little IT involvement.

There's some skepticism over Siebel's other plans for growth, including pushing its Universal Application Network integration software for use in Siebel as well as non-Siebel-related projects. The jury is still out on whether that software can compete with suite vendors' integration tools, says a recent Goldman Sachs report. Siebel is also touting its simplified analytics software, but analysts say most application vendors underestimate business intelligence as a strategic technology.

Finally, the vendor says large companies spend $21 billion annually to maintain homegrown apps. Siebel wants to custom-craft its vertical software to replace these systems. "In 10 years, when you call your bank, you'll interact with a packaged CRM product," Schmaier predicts. Nissan Motor Acceptance Corp., Nissan North America's financial-services arm, just bought Siebel's auto-industry CRM app to replace a homegrown customer-service system because it will be cheaper and easier to maintain, says Sean Hicks, a senior manager at the division.

Siebel may have stumbled, but it's known to play hard. That will be in the company's favor if it hopes to master the changing CRM game.

--with Beth Bacheldor, Eileen Colkin, and Rick Whiting

Photo by Eric Millette