Siebel Systems, Inc.
Siebel Systems, Inc.
Sales: $790.9 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: SEBL
NAIC: 511210 Software Publishers
Siebel Systems, Inc. began in sales force automation software, then expanded into marketing and customer service applications, including customer relationship management (CRM). From the time it was founded in 1993, the company grew quickly. Benefiting from the explosive growth of the CRM market in the late 1990s, Siebel Systems was named the fastest growing company in the United States in 1999 by Fortune magazine. With the growth of electronic commerce, Siebel formed strategic alliances and made several acquisitions to provide e-business solutions for CRM and related areas. One secret to Siebel’s success has been its ability to form alliances; as of late 2000 the company had more than 700 alliance partners. Revenue for 2000 was expected to surpass the $1 billion mark.
Providing Software for Sales Force Automation and Customer Relationship Management: 1993-97
Siebel Systems, Inc. was founded in 1993 by Thomas M. Siebel and Patricia House. Siebel served as the company’s chairman, CEO, and president, and House was the firm’s marketing vice-president. Previously, Siebel had served as CEO of Gain Technology, a multimedia software firm that merged with Sybase Inc. at the end of 1992. Prior to that he held a number of executive management positions at Oracle Corporation, where he and Pat House met in 1986. At Oracle, Tom Siebel developed the software to run Oracle’s product marketing division.
When Siebel Systems was founded, there were some 400 vendors serving the emerging market for sales force automation software. Most of the products being offered were electronic contact managers. As Tom Siebel wrote in Forbes ASAP,”We thought that if we could build robust software systems that enabled large organizations to apply information technology and communication technology to establish and manage customer relationships across the range of interactive channels—field sales, telesales, telemarketing, the Web, resellers, and customer service—we might create a viable business.”
Siebel hired software engineer William Edwards, former head of the engineering department at document software company Frame Technology Corp., to oversee software development. Guided by his own market research, Siebel established broad guidelines for the new sales force automation software that he wanted: make the software scaleable, so that it worked as well for a 50-person sales force as for a 5,000-person sales force; make it work in several languages and currencies; and make it customizable, so that it would work for companies in different industries.
Siebel’s sales force automation software allowed teams of sales people to analyze, access, and act on a centralized collection of detailed information about competitors and clients. In 1994 Siebel released the Siebel Sales Information System, priced between $3,500 and $6,500 per seat, for companies with large sales forces. It ran on the Windows NT operating system and would be co-marketed by Microsoft Corporation and Siebel. Among the company’s early clients were Charles Schwab&Co., Cisco Systems Inc., Andersen Consulting, and Compaq Computer Corporation. Charles Schwab joined Siebel’s board of directors in October 1994 and bought a 2.5 percent interest in the company. Andersen Consulting’s managing partner, George Shaheen, also joined Siebel’s board, with Andersen Consulting taking a 10 percent stake in the company in 1995. By 1997 Andersen employed 300 technicians who specialized in installing Siebel software for its clients.
By 1995 Siebel Systems had $8 million in revenue. It shipped the initial release of Siebel Sales Enterprise software in April 1995. At the end of the year the company introduced version 2.0, which added new sales management tracking and reporting capabilities, including a new executive information system that displayed real-time sales forecast and “opportunities”data. Priced at $1,750 per user, version 2.0 also automatically converted currencies and allowed users to generate quotes.
For 1996 revenue jumped to $39 million. In June 1996 the company went public. A number of enabling technologies were just becoming more widely available, including replication technology, high-performance relational databases, Windows, 32-bit processing, object-oriented programming, multimedia capabilities, and high-bandwidth communications, among others. Siebel was expanding beyond sales force automation (SFA) software into software for customer service and marketing.
Siebel made two acquisitions in September and October 1997: InterActive Workplace Inc., which specialized in intranet-based business intelligence software, for $15 million in stock, and Nomadic Systems Inc., which focused on the pharmaceutical industry, for $11 million in stock. For 1997 Siebel’s revenue rose to $120 million.
Acquisitions and Alliances Accelerating Growth: 1998-2000
In 1998 Siebel launched the Siebel Certified Consultants program. By the end of 2000 Siebel had more than 400 consulting partners who would recommend and install Siebel solutions for their clients. Siebel acquired Scopus Technology Inc. for about $460 million in stock in 1998. Scopus specialized in software for customer service, field service, and call center applications, and formed the basis for a new business unit at Siebel. Following the acquisition Siebel would have 900 employees and more than 500 customers. Siebel was now considered the market leader in sales force automation software, ahead of competitors Vantive Corp., Aurum Corp. (a subsidiary of The Baan Co.), and Clarify Corp. Tom Siebel predicted that his company, along with SAP America Inc. and Oracle, would emerge as the top three companies in the enterprise relationship management system market. According to one 1998 survey, the market for sales force automation (SFA) software would grow to $6 billion in 2003, from about $600 million in 1993. Sales&Marketing Management estimated the market for SFA software at $1 billion in 1998 and projected it to grow to $3 billion by 2000.
Siebel continued to pursue its strategy of forming alliances with other companies and adding new features to its SFA software. In October 1998 Siebel formed a partnership with Active Software, which would make connectors to integrate Siebel’s software with packages from SAP, Oracle, PeopleSoft, and Baan. Siebel also began shipping Siebel Marketing Enterprise software, which integrated data mart technology from Sagent Technology Inc. and included more than 60 marketing analysis tools.
In 1998 SFA software was evolving into the broader arena of customer relationship management (CRM), or enterprise relationship management (ERM), as it was also known. Siebel was able to offer not only SFA software, but also call center solutions and a variety of other front-office applications that would help businesses better manage their customer relationships.
Siebel 99, introduced at the end of 1998, represented a significant upgrade. It included not only a variety of new tools, but also offered access from the Web as well as from a Windows CE handheld device. Among the new features incorporated into Siebel 99 were a sales coaching tool, a presentation generator, an automatic expense reporting tool, and new analysis tools. The coaching feature, which helped call center operators handle service and support calls, was based on technology acquired from Scopus Technology.
For 1998 Siebel saw its revenue rise 89 percent to $391.5 million, while net income rose 135 percent to $55.7 million. Tom Siebel told InfoWorld,”We’re the fastest growing company in the history of the application software business.”At the end of the year Siebel had about 1,400 employees and had operations in 24 countries.
In early 1999 Siebel stepped up its branding campaign by launching a web portal, offering free software, and announcing Siebel Sales for Workgroups for release later in the year. The web portal, www.sales.com offered a range of free information and services for sales personnel. Siebel also was distributing a free version of its Siebel Sales 5.0 module for individual users. In addition, the company advertised its name by having the free software module bundled with certain Compaq computers. Siebel dubbed its initiative to reach individual sales professionals and small and mid-sized companies “Siebel Everywhere.”
Through an alliance with Siebel, management consulting firm Keane Inc. announced that it would launch its customer relationship management (CRM) practice and offer packaged applications from Siebel. Keane estimated that the alliance would result in $75 million in CRM-related consulting and software revenue in 1999.
During the year several high-ranking executives from rival SAP America defected to Siebel. They included Paul Wahl, former CEO of SAP America, who became president and COO of Siebel in May 1999, and Jeremy Coote, former SAP American president, who became Siebel’s vice-president of North American operations. Following the appointment of Wahl as president, Tom Siebel would continue as the firm’s chairman and CEO. Toward the end of 1999 SAP America filed a lawsuit against Siebel Systems for predatory hiring practices, claiming Siebel hired 27 former SAP executives during the year.
Siebel Systems, Inc. was founded in 1993 to address the growing need of organizations of all sizes to acquire, retain, and better serve their customers. Today, Siebel Systems is the world’s leading provider of eBusiness application software, with more than 6,000 employees who operate in more than 30 countries and 100 offices around the world.
Other alliances formed in 1999 included an agreement with enterprise resource planning (ERP) vendor J.D. Edwards to offer Siebel’s SFA software modules with Edwards’s flagship One World ERP suite. Siebel also began bundling Microsoft’s SQL Server 7.0 database as an option and offered low-priced upgrades as an incentive for customers to drop Oracle’s database platform in favor of Microsoft’s product. At the time Siebel and Oracle were going head-to-head for leadership in the SFA and CRM applications markets.
Siebel formed an alliance with Great Plains Software Inc. to deliver a suite of front- and back-office applications. Great Plains’ back-office applications included accounting, financial, and manufacturing packages. Under the agreement the new suite would add Siebel’s front-office applications covering sales, marketing, and e-business functionality. The combination would allow users to complete sales transactions over the Web, for instance. Great Plains delivered the first component of its new package in November 1999 as the Sales and Marketing Series of Great Plains Siebel Front Office, with customer service and call-center applications to follow in 2000. The suite was aimed at small and mid-sized businesses.
The market for CRM solutions exploded in 1999 and was projected to reach $16.8 billion by 2003. In mid-1999 competitor Oracle Corporation announced that it was creating a dedicated sales group for CRM solutions that would be headed by Craig Brennan, a former Siebel implementation leader. Siebel, for its part, claimed that it would surpass Oracle in applications revenue in 1999. Siebel also added web-conferencing and document-sharing capabilities provided by ActiveTouch Inc. to its sales.com portal. Meanwhile, the number of vendors offering SFA and CRM solutions had declined from around 400 in 1993 to about 40 in 1999, with further consolidation likely.
CRM competitors SAP, SAS Institute Inc., and Siebel all signed agreements with Dun&Bradstreet in mid-1999 to incorporate D&B’s data on 50 million businesses with their CRM software. A new trend emerging in mid-1999 involved application service providers (ASPs) adding CRM applications to their hosted services. Siebel formed a relationship with ASP Corio Inc. to allow Corio to host Siebel’s full suite of CRM applications. Corio integrated the Siebel applications with Peo-pleSoft’s enterprise resource planning (ERP) suite to provide clients with a complete hosted service.
Toward the end of 1999 Siebel and IBM agreed to jointly develop and market Siebel’s CRM applications, while Siebel agreed to tune its applications for IBM platforms. The agreement was another sign that the market for CRM applications was surpassing the market for ERP applications. Whereas ERP applications focused on cutting costs, CRM applications were designed to drive revenue by giving sales forces the tools they needed to win and retain customers. The explosive growth of the Web and e-commerce was making customer loyalty a fleeting concept. The new emphasis would be on customer service, aided by CRM applications, to win and retain customers. Siebel faced competition from ERP vendors who were adding CRM applications to their offerings, such as ERP vendor PeopleSoft Inc., which acquired CRM vendor Vantive Corp. in 1999.
At the end of 1999 Siebel was recognized as the fastest-growing technology firm in the United States in the annual survey, Technology Fast 500, which was conducted by accounting firm Deloitte&Touche. From 1994 to 1998 Siebel’s sales increased 782,978 percent, according to the survey. During the year Siebel’s stock was added to the NASDAQ 100 index, and Siebel was named the fastest-growing company in the United States by Fortune magazine.
At the end of 1999 Siebel acquired OnTarget Inc., a provider of consulting services and training programs for sales and marketing organizations, for about $250 million in stock. OnTarget, whose markets included high-tech, telecommunications, and professional services companies, would become a wholly owned subsidiary of Siebel.
Siebel also completed a number of Internet-related alliances. It joined forces with procurement vendor Ariba Inc. to integrate the two companies’ software applications to better link buyers and sellers over the Internet. Ariba specialized in business-to-business e-commerce solutions. Another strategic alliance with BroadVision Inc. would result in integrating BroadVision’s personalized e-business applications with Siebel Front Office applications. Both companies committed joint development, sales, and marketing resources to the venture.
Just before the end of 1999 Siebel spun off sales.com as an independent, private company, backed by $27 million in funding from Siebel and venture capital firms Seqouia Capital and U.S. Venture Partners. Siebel would not have a controlling interest in the company, but its executives would sit on the board of sales.com. Sales.com was subsequently folded back into Siebel toward the end of 2000, with company officials citing the difficulty in raising capital for dot.com companies in general as the reason for the action.
For 1999 Siebel reported revenue of $790.9 million and net income of $122.1 million. For 2000 Siebel was poised to become a major provider of e-commerce infrastructure software, and sales were projected to reach the $1 billion mark. During the year 2000 Siebel would continue to make acquisitions, form strategic partnerships, and continue its rapid growth.
In January 2000 Siebel acquired Paragren Technologies Inc., a specialist in marketing automation software. The acquisition added marketing features that were lacking in Siebel’s product portfolio. Paragren’s One-by-One suite pulled customer data from data warehouses and applications, then used that data to segment customers. It could then build personalized marketing campaigns around those segments and track and analyze campaign performance. Siebel planned to integrate One-by-One to allow sales and service personnel to access data generated by marketing campaigns and customer responses.
- Siebel Systems, Inc. is founded by Thomas Siebel and Patricia House.
- Siebel delivers Siebel Sales Enterprise software for sales force automation.
- Siebel becomes a publicly traded company.
- Revenue surpasses the $1 billion mark.
During the year Siebel entered into strategic alliances with several companies to strengthen its e-business solutions. Among the companies involved were Aspect Communications Corp., American Management Systems, i2 Technologies Inc., Manugistics Group Inc., and Avaya, a Lucent Technologies company. Siebel also entered into a global strategic alliance with management consulting firm PricewaterhouseCoopers.
The company also expanded its alliances with IBM, Compaq, Great Plains, J.D. Edwards, and other companies. In February 2000 Siebel announced that IBM would deploy Siebel eBusiness Applications on a global basis across its multichannel, customer-facing infrastructure to unite field sales and service, marketing and call center professionals, web sites, and business partners.
Siebel also introduced a new series of wireless eBusiness applications to provide field sales and service professionals with real-time wireless access to customer data. In March 2000 Siebel formed an alliance with Palm Inc., a 3Com Corporation company, to jointly market and sell handheld eBusiness solutions. As part of the alliance Siebel would integrate its eBusiness solution with the Palm Address Book, Calendar, and To-Do applications. Other wireless initiatives included a strategic alliance with Sprint PCS to market and sell nationwide access to Siebel eBusiness Applications over the Sprint PCS Wireless Web for Business. Later in the year Siebel announced a worldwide strategic alliance with Nokia Corporation to use the Nokia WAP (wireless application protocol) Server to provide wireless access to Siebel eBusiness Applications.
In April 2000 Siebel began shipping Siebel eBusiness 2000. This new package would allow companies to manage sales, marketing, and customer service across all communication channels and points of customer contact, including the Web, call center, field sales and service, and reseller channels. The MidMarket Edition of Siebel eBusiness 2000 began shipping in July.
Siebel subsequently acquired OpenSite Technologies Inc., a provider of web-based e-commerce solutions, for $542 million in stock. OpenSite products would be branded Siebel Dynamic Commerce and would be included in Siebel’s e-commerce product line. They would be used to support business-to-business online auctions and exchanges. In July Siebel acquired MOHR Development Inc., a privately held provider of sales training and consulting services for the financial services, manufacturing, and technology markets. MOHR solutions and expertise would be incorporated into Siebel Multichannel Services.
Later in the year Siebel acquired OnLink Technologies Inc. for about $609 million in stock. Siebel planned to integrate OnLink’s technology with Siebel eBusiness Applications to strengthen its position in e-commerce. Siebel further strengthened its e-commerce position by acquiring Toronto-based Janna Systems Inc. for stock worth approximately $1.1 billion. Janna was a well-known provider of e-business solutions for the financial services industry.
As 2000 drew to a close, it was clear that Siebel had successfully made the transition of CRM to the Web. It offered a suite that combined CRM, PRM (partner relationship management), and EAI (enterprise application integration) with personalization tools that helped organizations manage, synchronize, and coordinate sales, marketing, and customer service across all communication channels and points of contact. The firm’s revenue for 2000 would easily surpass the $1 billion mark.
Oracle Corporation; SAP America Inc.; Vantive Corporation (subsidiary of PeopleSoft Inc.); SalesLogix Corporation; Clarify Corporation (subsidiary of Nortel Networks); SAS Institute Inc.; E.piphany Inc.; Broadbase Software Inc.
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—David P. Bianco