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Tom Siebel: Paid to be paranoid

Tags:
SAP,
Microsoft,
Software,
Satmetrix

Alorie Gilbert ZDNet US

Published: 22 May 2002 13:12 BST

Siebel at one point spun off a company to sell hosted CRM applications and then folded it. Why don't you think this model works?

We had a separate company called Sales.com, and we folded it back into the company. I do not believe it's an economically viable model business model as a stand-alone company. There have been a lot of companies based upon the premise that companies will want to outsource their application software to a third party. This is what this whole ASP market was about...You look at the progress of those companies based upon that premise; they're all failing.

Why doesn't it work as a business model?

Because people don't seem to want to buy products that way. These companies are either all bankrupt or on the verge of bankruptcy. So the market for some reason exploded. By the way, we were one of the early companies offering our products that way, and we still do offer our product through that form factor so people can get our ASP model if they want. But for some reason, this is not how companies want it. It makes an intuitively comfortable argument -- but for some reason, it's just not how people want to buy software.

All the major CRM companies have introduced Web versions of their application. In terms of technology, what exciting developments lie ahead? Where does CRM go from here?

I don't think we're all there now (in terms of Web-based CRM). I think everyone is giving it lip service. But I think if you look for very high-performance, thin-client, zero-footprint CRM around product families that are functionally complete, that can operate with very high levels of currency and very high transaction volumes, I'm not sure everybody's there. I would agree that Siebel is there.

So what's next in terms of technology?

I think the big trends in CRM are going to be related to having very robust marketing analytics across all products. I think a very important area is going to be to lowering the cost of application integration for the end user.

How will you accomplish that?

We've done a great deal of work with something called the Universal Application Network. It's a combined initiative of IBM Global Services, Accenture, PricewaterhouseCoopers, Cap Gemini Ernst & Young, Vitria, Tibco and Seebeyond.

And what will the initiative do?

It lowers the cost of application integration by probably a factor of 100. We've built a very elegant architecture that reduces the effort involved in application integration by an order of magnitude. Essentially, we've reduced the number application connections, where N is the number of applications we want to connect. So at General Motors, for example, we need to connect 5,000 applications. Using traditional connectivity solutions, this what we call in the business an N-squared problem -- which means 25 million application connections that we had to establish and maintain. This is what we call a nontrivial problem. There aren't enough programs in the world to solve this. And so we reduced it from an N-squared problem to an order of N. So that's the economics of what we've done. And we're going to have virtually every leading integration provider coalesce on the same architecture.

Do you think Siebel is perceived as an arrogant company, and is that a problem?

Our customers do not perceive us as an arrogant company. I believe we're a company committed to whatever it takes to make sure each and every one of our customers succeed. I believe we're a company focused on being a leader in its field. I believe we're a company that's focused on carrying ourselves in the market with a high degree of professionalism. So I think those are the primary characteristics of our company.

After a disappointing first quarter for enterprise software, some analysts are questioning whether the business software market will bounce back later this year as anticipated. You said in April when discussing your first-quarter results that you couldn't believe sales wouldn't pick up in the second half of the year. Have you changed your mind?

I believe it will pick up this year. I think it's highly likely we'll see an increase in the demand for information technology in the course of 2002.

What signs do you see that would indicate this?

There are a lot of signs that are fundamentally healthy signs for the economy. We saw growth in GDP in the first quarter. We're seeing dramatic reduction in inventory levels. We've seen increased consumer activity. And I think that as it relates to capital expenditures, those are going to lag consumer spending a little bit. The question is, how far? Are they going to lag it by years? Unlikely. Will they lag by months or quarters? I think they will.

It's highly unlikely that we won't see an increase in technology spending this year. Will it be a dramatic increase? I don't think so. I think it will be 2003 before we see the thing really moving again in a big way.

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