Siebel Systems is far and away the leader in what’s known as customer-relationship-management (CRM) software, which, among other things, lets salespeople plan and account for their deals and gives customer-service reps instant access to information about consumers. The trouble is, Siebel software is highly tailored to each industry and hence very expensive–which is why the tech-spending drought comes at an awful time for the company. Its competitors are using the slowdown to improve their products and slash their prices.
Siebel’s custom-made software is complex to install and typically costs $2,000 per seat a year for corporations with 1,000 users. Rivals are now offering plain-vanilla software suites that have much of Siebel’s functionality for a lot less money. PeopleSoft might charge as little as $500 a year per seat for the CRM application it sells as an add-on to its human- resources and financial-management software. “There’s a certain good-enough threshold beyond which extra features are simply nice to have or even add an unneeded layer of complexity,” says Charles Phillips, an analyst at Morgan Stanley.
the company is fighting a two-front war. Besides attacks from SAP, PeopleSoft, and Oracle in the corporate market, Siebel’s role model, Microsoft, is among a host of companies trying to sneak up from below. In July, Microsoft introduced a CRM product for small business. That has not been a Siebel market to date but could be a jumping-off point for pursuit of bigger game. Startup Salesforce.com, which sells low-cost subscriptions to its Web-based CRM software, is also popular with smaller companies. With forecast revenues of $60 million this year, Salesforce is a pipsqueak next to Siebel, but Microsoft won’t be so easy to shrug off.