Siebel Systems has been at the forefront of automating front-office operations since its inception in 1993. And with a new industrywide emphasis on providing tangible returns on investment, front-office applications such as sales automation, customer service, and marketing are one of the few primary places in which IT organisations will be increasing their investments in 1999. Thomas M Siebel, founder, chairman, and chief executive officer of Siebel, talked with IDG's Michael Vizard and Katherine Bull about the trends that are driving the development of front-office applications, a pending major upgrade of the company's applications, and its plan to enter the Web-application hosting businessIDG: Front-office applications certainly command a lot more interest from IT organisations these days. What's driving this change?
Siebel: The attention to the front office is being driven solely by market growth. In 1995, this was about a $100 million market segment, and there were 400 companies operating in it. Today, in 1998, it's going to be a $1.5 billion market segment.
It's growing at a 54 per cent compounded growth rate, so it's the fastest-growing segment in the enterprise application space.
According to Forrester Research and other researchers, it's a market segment that is expected to be larger than the ERP [enterprise resource planning] space in the year 2000.
Do you worry about new competitors such as Oracle and SAP using their size to compete with you?
We represent about 70 per cent of the market share today in licence revenue. SAP and Oracle have been quite vocal about coming into this market since 1994.
They both have had repeated aborted attempts to bring products to the market since 1994 and have been largely unsuccessful. I believe they will continue to try to bring products to market, and sooner or later they might succeed. When they succeed in bringing a product to market, you better believe we will pay attention to them.
Why do you think Oracle and SAP have been unsuccessful?
The people at Oracle are clearly experts in relational database technology. The people at SAP clearly have domain expertise in the area of logistics, supply chain, and manufacturing. I do not think the areas of sales, marketing, and customer service software are areas of domain expertise for either one of these firms.
This isn't simply something you can throw a thousand software programmers at. It's something that somebody in the organisation has to know something about. I think that's where they've been lacking.
We see a lot of companies broadening out their services beyond sales-force automation to include customer service and marketing. What is the relationship between these areas from an IT perspective?
From 1993 to '95, we were in the sales-force automation space. Then we introduced the customer service product and a marketing product. Customer service is about as large a business for us as sales automation is today.
The general area that we're about is what we call customer management. We allow organisations to apply information technology and communications technology to the problem of establishing and maintaining customer relationships. We do this through the full life cycle of customer management - whether it's identifying prospects, making prospects customers, and managing customers through their entire life cycle of product use.
One of the major criticisms of applications such as sales-force automation is that they tend to depend on salespeople actually entering data. Is there a way to build sales-force automation tools that gather data subtly, rather than forcing salespeople to enter that data?
The underlying philosophy of these systems has changed quite dramatically. They used to be about taking information from a sales force. They were very much about control and extracting data from people. Those systems that people have deployed have failed because they get rejected by the sales organisation.
Our systems today offer a more enlightened approach to the problem - what we call enterprise relationship management - that is very much about empowering people. They are about giving salespeople and service people the information they need to succeed at their jobs by giving them up-to-the-minute fingertip access about their products, competitors, and customers.
How will the emergence of direct sales models over the Internet affect those relationships?
In the past, companies selected a distribution channel to reach their customers. In the future, this will not be the case. Successful companies are not selecting a distribution channel to reach their customers. They're using every distribution channel to reach their customers.
In order to support the desired organisations to reach and maintain relationships with their customers simultaneously through virtually every channel that exists, a new type of software is required that can simultaneously support all of these channels at the same time.
To do that, it's got to be an entirely Web-based architecture hooked into the same common information system. Using an extranet, we can reach out and bring customers into the information system and let them engage in product configuration, selection, and Internet self-service.
So Siebel will be accessible from any device on the Web?
What we're doing in Siebel '99 is an initiative we call Siebel Everywhere. So if it's got a chip in it, we can pretty much run on it. The user interface and the business logic associated with the business activity just reconfigures itself for the device on which it's being deployed. It's pretty cool.
Sales and marketing people tend to be a mobile workforce. Are you providing any new services with Internet service providers to support those workers?
The area that we're talking about is the general area of application hosting services. Beginning in the first quarter, these are services that we are offering our customers.
So we will take care of the problems associated with the database server, the operation of the machine, the operation of the database, the support and maintenance of the Siebel server software, and all the connectivity issues associated for the sales organisation.
We might, for example, just bring in an OC3 phone line for a customer in the door, and take care of all those hurdles.
Do you have any idea what types of customers are asking for this service?
When you get into the middle market, it makes it easier for companies to deploy. It facilitates technology transfer and allows organisations to go live quicker.
After this latest release of your software, what do you need to focus on next?
We're going to see a very large focus on software agent technology. The next logical step is to start taking salespeople out of the loop and allow people to select products themselves.
Software agent technology in the form of virtual buying agents and virtual selling agents will act independently of the organisations or individuals they represent. They will engage in product selections and deep product procurement in an automated fashion.
This is going to be very exciting and breakthrough stuff, and that's got to be a real focus area for us.
So when a buying agent and a selling agent are in conflict, how will they negotiate?
The buying agent is going to win. Software agent technology will bring dramatic price compression. The buying agent is going to have to instantly be connected, in real time, with every provider of a product in the world. So whether we're buying a mortgage, whether we're buying a copier, or whether we're buying a sailboat, that buyer is going to be communicating with every seller in real time, and the lowest price will emerge. Premium pricing is over.
When software agent technology meets the Internet, dramatic price compression results. We've been working on this pretty diligently now for about 18 months.
We will see software agent technology come to the market as part of the Siebel product line in the 1999 time frame - not in the initial Siebel '99 release, which is right now, but in the Siebel '99 time frame.
So what worries you most?
Today, we are 1400 people operating in 24 countries on six continents. In fact, we're the fastest growing company in the history of the application software business.
My concern is that - apart from a concerted effort to drive a wholesome corporate culture - we will create yet another pathological corporate environment. Or become yet another company with a parking lot filled with Ferraris, where the CEO presents himself to the market as this creator of insanely great technology, or this great visionary, or this great entrepreneur, or this great technologist. We don't want to have all kinds of self-important, arrogant people engaging in e-mail wars while meeting customers in blue jeans and a T-shirt.
We're here to do whatever it takes to make the customer successful with the highest level of professionalism. So my concern is to make sure we don't become another pathological Silicon Valley story.