Siebel maintains leadership as earnings slip

Despite a run of poor financial quarters, Siebel is still tops in enterprise CRM, according to a study from Forrester. SAP, Oracle and Amdocs are close on its heels.

Despite shrinking profits and growing competition, Siebel Systems Inc. remains the top dog overall in the world of enterprise CRM, according to a recent study.

The latest Wave report on enterprise CRM from Cambridge, Mass.-based Forrester Research Inc. scores the San Mateo, Calif.-based company the highest among "the big four," said analyst William Band. The other top scoring vendors were Germany's SAP AG, Redwood Shores, Calif.-based Oracle Corp. and St. Louis-based Amdocs Ltd.

"Siebel continues to be the market leader," Band said. "However, they're being challenged very hard and strongly by other players."

SAP has invested heavily in the last couple of years and closed the product functionality gap
William Band
Forrester analyst

Nowhere is that more evident than in the company's recent financial performance. For the quarter just ended, Siebel yesterday reported a net loss of $50 million or 10 cents a share, compared with earnings a year ago of $7.5 million. That stands in sharp contrast to SAP and Oracle, which both announced positive earnings in their most recent quarters.

And while Oracle has database and applications business outside of CRM, SAP has a wider applications business and Amdocs offers CRM and billing technology focused on the communications industry, Siebel's slump cannot be attributed solely to the decline of enterprise CRM. Despite much talk of its demise, the market for large-scale CRM is alive and well, according to Forrester.

CRM spending worldwide will grow to $13 billion this year, Band said. However, only $3.3 billion will be spent on software licenses. The majority of CRM program costs will go toward integration, administration and maintenance.

Siebel maintained its leadership position on Forrester's Wave, thanks to having the broadest, most complete set of functionality, the largest user set and its industry-specialized offerings, Band said. However, functionality is becoming less and less of a factor in buying decisions.

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"SAP has invested heavily in the last couple of years and closed the product functionality gap," he said.

Forrester based its rankings on 177 different criteria, each given a different weighting. Functionality was given less weight in the study because the gap separating the top competitors is narrowing. Siebel and Oracle both scored well in customer data management -- an increasingly important factor in CRM buying decisions -- and, despite its shrinking sales figures, Siebel scored well in market presence, Band said, thanks to its large user base.

Still, Siebel did have some good news in its latest earnings report. Its OnDemand business, Siebel's hosted CRM offering, grew its contract value 250% in the past year and now counts nearly 40,000 users.

Additionally, the company is hitching its wagon to component assembly of CRM, providing organizations with the building blocks and basics for the front office business applications they need and helping them build the rest. Siebel has closed its first $1 million component assembly deal and will announce it soon, CEO George Shaheen said on a conference call with financial analysts.

Shakeups to the executive team continue as well. Executive vice president David Schmaier has moved from products to strategy, the company has hired a new chief marketing officer to help strengthen its brand and a new global services leader should be announced in the next two weeks.

The business intelligence technology, which had recently been a strong earner for Siebel, has fallen off as well, with sales down 30% from last year.

"We tied business intelligence very closely to the CRM license business," Shaheen explained to analysts. "When that declines, the analytics is going to suffer as well. We are reassessing our analytics and business intelligence as it relates to CRM. If we don't, we're tied to closely to the ups and downs of CRM market."

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