When Crestone International Inc., a $60 million software consulting company, dropped Siebel
Systems' CRM software in favor of PeopleSoft last November, hidden costs and poor service had been
the main drivers behind the move.
"We all had a bad taste in our mouths from working with Siebel," says Sean McCormack, chief
operating officer of the Atlanta-based firm. McCormack also complains that Siebel levied extra fees
for integration tools -- tools he'd been lead to believe came with the CRM software.
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At the same time, he concedes that Siebel offers levels of functionality that PeopleSoft may lack.
"PeopleSoft CRM is not as mature in functionality but, for a company of our size, it has all of the
functionality we need," he says.
Richard Purchase, director of service development at Innovex, a $140 million provider of sales and
marketing services for health care companies, decided against Siebel CRM because its price
structure wasn't sufficiently flexible, he says. Instead, Purchase went with hosted CRM provider
Salesforce.com. "With Siebel, we would have had to commit to huge up-front numbers in licenses,
with no flexibility to increase or decrease those seats if our business required it," explains
Purchase. "The monthly rental model of Salesforce.com was a real differentiator for us."
It's a common conundrum: When do you spend the extra money on a market leader like Siebel, and when
do you opt for a lower-priced competitor? And it can be an especially tough choice for midsized
businesses, which may have limited budgets but big-company CRM needs.
"Midmarket companies can't always afford the R&D that Siebel has put into their product," notes
Eric Schmitt, senior analyst at Forrester Research, in Cambridge, Mass. He estimates the premium
that customers pay for Siebel CRM software ranges from a mere 5% to 300%.
According to a 2002 report from Wellesley, Mass.-based Nucleus Research, the average price tag for
a Siebel license is $11,513 per user, with initial per-user deployment costs of about $25,939. For
the first three years, the total average annual per-user cost is $18,040.
Wendy Close, research director at Stamford, Conn.-based Gartner Inc., puts the cost for Siebel at
$16,000 to $25,000 per user, a figure that includes software, services, training and hardware.
Companies that need the largest number of seats often get economies of scale that can bring the
price down to $12,000 per user. Nevertheless, while Siebel has been more willing to offer discounts
in recent months, she says, the vendor remains the most expensive player in the market.
Comparatively, Close calculates that the average project costs for small implementations of
PeopleSoft CRM total about $13,500 per user and, for larger deployments, the price really drops,
with average price ranges of $2,000 to $4,000 per user. Midrange products such as those of Onyx
Software Corp. and Pivotal Corp. run closer to $5,000 per seat.
So, in what situations does Siebel warrant the extra investment?
Schmitt cites several reasons to go with Siebel, one being its reputation as a market leader with
longevity: "There are some newer vendors with better technical architectures ... more
component-based, more flexible, and not wedded to their own data models," he says. "But they carry
a higher degree of risk. Some of those vendors have never made a dime of profit."
Another point in Siebel's favor is the plethora of Siebel-trained employees and consultants. "A lot
of people have trained on Siebel, so the skills are readily available," notes Schmitt.
Close adds, "Siebel is the only vendor that has both depth and breadth; they've achieved leadership
in multiple areas of CRM. ... So, for example, if I needed depth in sales automation and a really
good sales configurator and a best-of-breed customer service suite, and I wanted it all tailored
for the insurance industry, then Siebel would be a good fit."
Close also gives Siebel kudos for its support of multiple vertical industries. "They have over 20
vertical versions of their product, where it's been customized for each vertical, such as consumer
goods or pharmaceuticals," she says.
However, on the downside, many of those vertical solutions rely on partnerships that Siebel has
struck with outside vendors, which provide associated pieces of the functionality and business
processes required by each industry. And, according to a recent Gartner report, often those
partnerships are little more than co-marketing agreements, not true technical partnerships -- a
situation that can lead to poor integration and support and to frustrated customers, who may have
assumed they were getting end-to-end integration as part of the package.
Another consideration, particularly for smaller firms, is Siebel's mixed record on service. Gartner
rates Siebel "positive" overall for service, yet Close cites customer complaints about slow
response times from help desk staff and support partners, as well as difficulties getting problems
escalated up the support ladder -- complaints to which McCormack readily attests. "Any time we
needed to deal with them over anything, it was difficult to get a response," McCormack says.
Simplicity and speed of implementation is also an issue. "If the buyer has a fairly narrow set of
needs and wants to get something done in a quick and dirty fashion, then they might not want all
the overhead Siebel has," advises Schmitt. "It's a fairly complex tool and, if you don't have a
complex problem but you need to get it solved in 60 days, you may want to look at Pivotal or
another such product."
The bottom line, say the experts, is that any organization should conduct an analysis of its needs
before shopping for CRM. According to Nucleus Research, companies that first identify specific
goals, such as trimming support staff, are more likely to achieve positive ROI.
This was first published in July 2003
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