Siebel Systems' market challenges and strategic alternatives in 2003

Siebel Systems Case Study

The intent of this case analysis is to define a problem statement based on the significant challenges Siebel Systems finds itself in as of 2003 as defined in the article, Can Siebel Stop Its Slide? Missteps -- and tough rivals -- undermine the software giant (Kerstetter, 2003). A problem statement will first be used to frame the context of the problems the company faced during this period, followed by criteria for selecting a given solution. Constraints are also analyzed as they pertain to potential solutions for Siebel followed by the generating of alternatives. Based on an assessment of these alternatives, an implementation and solution strategy is next defined in addition to the defining of Key Performance Indicators (KPIs) that will be used for tracking how success of the strategy is measured. This paper ends with the recommendations presented.

Problem Statement

At this point in Siebel's history they had experience exceptional success with enterprise-wide Customer Relationship Management (CRM) systems were typically $10M or more in price and took 18 months or longer to implement. It is important to keep in mind that the actual software costs were a small percentage of the total cost of these implementations, with custom integration programming, development and services fees being 90% of any given implementation's price (Dunn, 2003). During periods of strong economic activity these fees were seen as an investment against future revenues, yet beginning in 2001 and through 2004, the U.S. And much of the global economies were in a recession. Larry Ellison, Founder and CEO of Oracle remarked that Siebel would die in the market conditions of 2003 as enterprise customers wanted a full suite of applications, not large, expensive, applications for just a single set of strategies (Kerstetter, 2003). With CRM vendor consolidation occurring, their own customer satisfaction deteriorating rapidly as their sales force overcommitted and under-delivered on very expensive enterprise CRM system implementations, and the underlying pricing model of CRM applications changing dramatically due to the OnDemand and Software as a Service (SaaS) delivery platforms shifting the market (Darrow, Garner, 2003), Siebel was assailed on several different fronts. The problem statement for Siebel that captures their challenges at this point is as follows: Siebel Systems was caught in the midst of a fundamental re-ordering of the enterprise software market to enterprise-wide suites of applications at the high end and the rapid price declines of SaaS-based applications on the low-end; not cognizant of this Siebel continued to habitually pursue customer referenceability even when it was not entirely accurate, further illustrating how out of touch they had become with the market. This was especially the case when companies listed as customers on their website were contacted by Nucleus Research, and independent research firm, and found that 61% were not satisfied with the performance of their Siebel software (Elgin, Sager, 2003). In keeping with this mindset when Siebel announced they were investing in SatMetrix Systems naturally no one believed they would be impartial in their use of this technology; it was assumed they would use SatMetrix to accentuate the positive aspects of their own implementations and downplay the negative (Kerstetter, 2003).

Constraints

The greatest constraint that Siebel faces is the quickly changing CRM landscape that is favoring SaaS-based applications, the increased reliance on predictive analytics (Barbetta, 2004), and the use of integration solutions by competitors to get their CRM applications within the process workflows of customers more efficiently. There is also the major constraint of Siebel's cost structure that favors enterprise-wide, $10M+ CRM implementations (Kerstetter, 2003), which is going to be very difficult for the company to overcome. Another constraint is the lack of transparency and authenticity in their culture, which is far more difficult to change.

Alternatives

The following are the alternatives available to Siebel Systems. First, the move to concentrating on vertical market applications (Schwartz, 2003) is one of the least risky. It also gives the company an opportunity to create more relevancy in its software applications over time by concentrating on the needs of a given vertical or specialized market. Alternatives abound in their product strategy, yet it is clear that the move to SaaS-based applications is critical in the current economic environment of the case study. Third, the implementation methodology needs to concentrate on being more efficient, less costly and more attuned to the needs of customer first. In the time period of the case study, the implementation plans are more focused on the profitability of Siebel being maximized. Fourth, Siebel needs to also concentrate on making their analytics and integration strategies more available over SaaS-based platforms as the market is moving in this direction.

Implementation and Solutions Strategy

In making Siebel more competitive, the first decision to make is to concentrate more on a modular, more precisely tracked series of applications in terms of the value they deliver to customers, in addition to making them more efficiently implemented over time. This focus on a more modular application platform that has analytics built into it is critical for Siebel to provide the Return on Investment (ROI) of their applications over time. The implementation and solutions strategy also needs to drastically redefine the methodology approach Siebel uses for getting customers up and running, including defining a more realistic series of benchmarks and key analytics to measure success over time. In keeping with this focus, Siebel also needs to concentrate on creating an index of customer satisfaction that dictates if their employees get bonuses or not from the implementations they work on. Lastly, Siebel needs to seriously revamp their customer reference process to make it more aligned with current market realities rather than attempting to make their success stories match a previous, yet highly profitable time in the CRM market.

Measuring the Success of the Strategy

The use of Siebel Analytics applications (Barbetta, 2004) for defining dashboards and scorecards for each customer engagement is critically important. Indexing the performance of the implementation teams' bonuses and pay to the satisfaction level of customers they are installing software will quickly close the gap between Siebel claims are customer satisfaction levels and what they actually are. These dashboards and scorecards are necessary for keeping the implementation of Siebel software on track, and once in place, ensure the software is continually delivering exceptional value.

Recommendations

Clearly Siebel must fundamentally re-define themselves to stay relevant and viable in the rapidly changing enterprise software market. First, Siebel must move away from their overt dependence on only selling very large, very expensive CRM systems. The market has moved away from this type of implementation and is embracing smaller, more modular applications that are often on the SaaS and OnDemand platform (Darrow, Garner, 2003). This modularity of their applications will allow them to be more aggressive on pricing, and also tackle the second strategic weakness they have today, which is the gulf between what they say customer satisfaction is and what it actually is (Elgin, Sager, 2003). Redefining the implementation methodologies is critical for Siebel not only from a customer satisfaction perspective but also from a customer referenceability one as well. Third, Siebel needs to look at SaaS as the new platform of choice for integration platform solutions including UAN (Jones, Schwartz, 2003) and the delivery of highly specific vertical market applications that will resonate with customers in the midst of the recession that was occurring at that time (Schwartz, 2003). Finally Siebel must become more transparent and genuine in their dealings with the analyst community as they are clearly seen as out of touch by AMR Research (Kerstetter, 2003) and Gartner. The bottom line is that Siebel, while very profitable and excellent at enterprise software market, is rapidly becoming an anachronism in a very fast changing enterprise software market.