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Siebel's midmarket strategy still somewhat murky

When it comes to the midmarket, Siebel is like a teenager who can't decide what to wear in the morning, trying on and discarding various ideas in an effort to find the perfect fit. ("Should I go with the channel sellers? Maybe telesales would be a better fit.")

The problem is, the CRM midmarket isn't a chenille sweater, and strategic dilly-dallying could hurt. According to analysts, Siebel's midmarket strategy is hard to pin down these days.

"I know they still sell a package, but I haven't been briefed for quite a while on their midmarket strategy," said Karen Smith, a research director at Boston-based Aberdeen Group. "My understanding is that they are placing less emphasis on it."

Siebel's lack of a strategy could come back to haunt the company. As the market becomes saturated with enterprise-class CRM offerings, more and more industry players are targeting the midmarket. Wendy Close, CRM research director at Stamford, Conn.-based Gartner Inc., said that fewer than 20% of midsized companies have implemented CRM packages.

"That's a huge untapped market, and that's why companies such as Microsoft are going after it," she said.

Big ERP companies such as SAP AG and PeopleSoft Inc. are also interested in the midmarket, while smaller players such as Onyx Software Corp. and Pivotal Corp., already midmarket players, are concentrating more on their home turf these days.

But the Redmond, Wash.-based software giant

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has made an impressive bid for this market, building a sizable reseller channel, Close said, to target the low end of the midmarket. "Microsoft is really building momentum here," she said.

Siebel, on the other hand, is taking an approach that flies in the face of conventional wisdom, at least when it comes to selling its Siebel 7 midmarket packages. (It has two: Enterprise Edition and MidMarket Edition.) Most analysts say that selling in the midmarket requires a strong value-added reseller (VAR) channel, since many companies in the small and midsized business range have developed close relationships with local channel resellers and make many of their software purchases through them. And while Siebel will continue to sell through channels in certain geographic regions, it is concentrating its efforts on telesales, keeping a network of about 400 integrators on call for implementation, said Rich Reimer, director of midmarket products at Siebel.

"We've found that VARs are not as effective as working with integrators and telesales folks," he said. "Most VARs are five- to 15-person shops. They're comfortable with things like network installation and Windows NT. But the type of company we're going after is reasonably sophisticated and wants CRM expertise." The integrators provide that in spades, he said.

Reimer also says that speed of installation is important. Midsized companies don't have the financial resources to withstand a drawn-out installation and training process. "What that means," he said, "is that you need to produce an application that doesn't require a large IT staff to install and [which] is intuitive enough that people can learn it with little to no training."

That was what sold Advertising.com on Siebel's MidMarket Edition, said Karen Jacobs, a product manager for the Baltimore-based direct marketing company. "We needed a quick solution, because we didn't have the resources for a long implementation," she said. "The entire implementation took five days. Plus, Siebel worked with us to find a local consultant to implement the package, which avoided travel costs."

Jacobs acknowledges that going vanilla and small was a key point to the quick installation. The company started with just the sales module; then it installed several other modules. "We've gone from being a sales seat to a full call center seat," she said. "It's really to the point where, with the exception of HR or legal, it's hard to come across a department that's not using Siebel."

When it comes to cost, however, customers might not be so happy. Gartner's Close says that Siebel's tools can cost considerably more than the competition's. She's run some estimated numbers on the cost of a Siebel installation versus those of Onyx and Pivotal.

"So far, I've found that, for a 120- to 250-user installation, which is a typical midsized business project, Siebel costs $16,000 to $25,000 per user for hardware, software and services," she said. "In comparison, Onyx is about $4,300 per user, and Pivotal comes in at around $3,000 to $4,000 per seat."

Of course, right now, the midmarket is wide open. Who will win the rumble? "It's going to be fun to watch," Smith said. "It depends on whether Microsoft can execute in the CRM arena and whether Siebel can keep hold of its installed base. They still have the largest market share of the CRM market and remain a very significant player."


FOR MORE INFORMATION:

Gartner: CRM competitors inching in on Siebel

Gartner: Microsoft looms over CRM midmarket


This was first published in June 2003

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