Despite industry rumors to the contrary, Tom Siebel, the CEO of front office vendor Siebel Systems Inc yesterday denied his company was looking to expand its market by purchasing a back office enterprise software vendor. Speaking during its second quarter earnings conference call yesterday, the CEO said the problems facing the ERP sector weren’t related to the Year 2000 but rather were the result of a contracting, incredibly competitive market, where panic price slashing is rife. [ERP] is a really crummy market…..I’m trying to figure out what it is that we would find attractive about it. he told analysts. We’ve made it easy for our customers to use Siebel with the HR, manufacturing or financial products of their choice with the ERP vendors of their choice….the technology [integration] hurdles, how significant are they? pretty straight forward.
The San Mateo, California-based company reported second quarter net income of $25.8m, or $0.24 per share – beating analysts’ consensus polled by First Call by three cents – compared to a net loss last time of $810,000 on revenue up 83% at $164m. Revenues from license fees increased 63% compared to the same quarter last year and accounted for 67% of total revenues, while sales from maintenance, consulting and related services increased $140 year on year.
The CEO used the figures to show how the market for front office software, unlike the ERP sector, was growing rapidly. In fact, he said the market was so large that quite honestly, it’s everything we can do to continue to grow our infrastructure and management…to meet the needs of this market, he said, we’re going to stick to our business and do what we do best.
Interestingly, despite the very public, ongoing acrimonious battle between Siebel and rival Oracle Corp, neither the CEO nor his line up of spokespeople, including the company’s newly- appointed president and COO Paul Wahl, made any reference to the database giant and instead told analysts that Vantive Corp posed the biggest threat during its second quarter, followed by Clarify Inc, both of whom managed to win business over Siebel, the officials said. Despite claims from Oracle – and industry analysts – to the contrary, the CEO said the competitive landscape had changed very little and added that as much as 35% of the company’s new business during the quarter was uncontested.
But by the same token, he acknowledged that the front office sector had only been penetrated to around 5% of its total potential, paving the way presumably for giants like Oracle to move in take a slice of this lucrative market for itself. But if Siebel was concerned about that, there was certainly no talk of strategy to prevent such a takeover from happening. The CEO simply said the market was growing at such as rate it was hard to say for sure how big it actually is. All we know is it’s bigger than we’re able to address right now and we’re trying to expand our footprint so that we can address a bigger chunk of it.
It’s for that reason that the CEO said Siebel had specifically concentrated on forming a number of major partnerships during the second quarter and he highlighted alliances with ERP vendor JD Edwards and Great Plains Software as being particularly significant for Siebel’s push into the mid market sector, a market where Siebel has traditionally lacked a strong foothold. Through its partnership with the latter in particular, Siebel is banking on Great Plains’ 1,400 reseller partners to have a significant impact on penetration of the mid-market. The company also pointed to its deal with Qwest Communications Inc, who will offer the Siebel Workgroup product line on an outsourced basis, as well as reselling its entire line of software, as being very important to the company’s plan to expand its market share over the next quarter.
But despite the obvious strong sales, the successful launch the next version of its front office suite and a growing list of satisfied customers, the CEO said the most significant development of the second quarter was putting in place a new management line-up, with the aim of positioning and steering the company through its forthcoming dramatic growth period. As well as Paul Wahl and Jeremy Cootes, VP North American operations, both from SAP, the company also added Thomas Hogan, former VP sales of IBM midrange systems, who joined Siebel as VP, international operations; Karen Riley, former general manager of IBM’s business process management division, joined Siebel as VP, global services; and Kirk Krappe, former VP of Oracle solutions marketing, who joined as its VP of industry solutions marketing. We added to the organization to allow us to continue to manage the company…with a continued focus on customer satisfaction, he said, we have the leadership and the experience to continue to manage very dramatic growth in a controlled fashion.
