The characteristically flamboyant CEOs of Oracle and Siebel Systems, Larry Ellison and Tom Siebel, are fighting a bitter war of words over their respective company’s prospects in the customer relationship management (CRM) market. Although the rivalry no doubt dates back to the days when Tom Siebel spent eight years in several key marketing roles under Ellison, the battle has now intensified with neither CEO afraid to mince words over the other’s position in the hot CRM marketplace.
Last week, Ellison, stated publicly that Siebel was doomed by a large number of unhappy customers. Oracle will poach several marquee names, he said, clearly trying to capitalize on a perceived disaffection amongst some 500 corporate accounts that came with Siebel’s May 1998 acquisition of customer support and service vendor, Scopus Technology.
Siebel has been criticized for forcing these customers’ hand. By sending Scopus products into maintenance mode and reneging on an earlier promise to provide free upgrades to its latest sales force automation, customer service and support suite, Siebel 99; the doyen of CRM is believed to have caused a great deal of customer unrest from which Ellison clearly thinks he can profit.
Scopus customers are clearly experiencing a major dilemma. If they don’t upgrade to Siebel 99 they risk facing the diminishing software support problems commonly associated with products no longer actively developed. Siebel is no longer putting development resources into Scopus SalesTeam, SupportTeam or ServiceTeam, the three core sales force automation, customer support and service modules that comprise the Scopus Suite.
However, if they make the jump and pay for the upgrade to Siebel 99 these customers will no longer be able to use the Terminal Control Language (TCL) extensions which provided particular customized features to their Scopus software. (Siebel applications are written in C++ with Visual Basic extensions.) A fair number of Scopus customers recruited TLC programmers to carry out this development work, so the knowledge that this work and the costs attached to it will go to waste is a further disincentive not to upgrade.
Ellison hopes he can make this somewhat trapped Scopus customer base into Oracle converts and made the first moves to lure customers over to OracleFront Office in December by offering a 50% discount on the latest release, version 3, plus an implementation methodology. The tactic has met with some success. Oracle is believed to have 20 Scopus customers that are currently implementing FrontOffice and the potential exists to increase this number if Oracle extends the offer beyond the end of February deadline, since the vast majority of Scopus customers use Oracle as their CRM database repository. (These accounts will add to the 200 FrontOffice customers it has already.)
Tom Siebel is no doubt highly irritated at Oracle’s success, so much so it prompted him to make these comments last week. It is hard to believe they [Oracle] could get better pricing than they have been offering in the past. Because they have been trying to give this thing away for three years and they can’t find anyone who’ll buy it. Their standard pitch when they find that out in an account is to say to customers ‘you can have it for free,’ So their [offer] of a 50% discount for Scopus customers is laughable. That was like a 10,000% increase over what they were offering the product to everybody else.
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There is a common perception in the marketplace that Siebel has a superior CRM product range and therefore Oracle will be unsuccessful in its marketing tactics. Siebel applications are so much better. Oracle is still on early releases while Siebel is shipping version 8. There’s no comparison, says Patrick Mason a CRM analyst at Preferred Capital Markets. This perception is not helped by the fact that Oracle has been announcing its intentions to enter the market for several years and only started delivering a suite of CRM products to equal the breadth of those offered
by Siebel with Oracle Release 11, in November last year.
Furthermore, Scopus customers’ migration problems are not hurting Siebel’s earnings so Wall Street has turned a blind eye and is willing to accept that the acquisition is complete and customers are satisfied, even though in private many admit that the migration path is not nearly as easy as Siebel suggests. The Scopus transition of 1998 is completed and all Scopus risks are a thing of the past, concludes a recent report by NationsBanc Montgomery Securities. Tom Siebel is, naturally, feeding this illusion. We completed the Siebel/Scopus integration in two quarters when everybody said it couldn’t be done. Scopus customers have a 100% migration path, we’ve made it really easy, he told analysts on a fourth quarter 1998 earnings call.
Siebel is beating earnings estimates and growing at a 44% compound annual growth rate a year, so Scopus to Siebel 99 conversion deals are not, for the moment, required to fuel revenue growth. The company can make it without them, as its most recent numbers demonstrate. For the fourth quarter 1998, the company reported revenues up 78% at $123m and a $0.20 EPS, on the same quarter last year.
Revenue projections for the next two years are equally bullish, having no doubt been helped by Tom Siebel’s comments to investors that the company was stronger than it had ever been and had only just scratched the surface in terms of market penetration. Analysts at Montgomery Securities project Siebel’s revenues will reach $572m by the close of 1999 and $805m in the year after with EPS of $0.78 and $1.10 respectively.
With such evidently strong financials and Wall Street on its side, it’s hard to see why Siebel would feel the need to lash out at Ellison, if he did not perceive Oracle to be some kind of threat. But lash out he has, both at Oracle’s Ellison and SAP’s Hasso Plattner, presumably in an attempt to underplay the impact the ERP’s giant entry would also have on this market. Last week he said: If and when [SAP and Oracle] deliver products to market, they will be substantial competitors. They have enormous development capacity and they are run by two of the most aggressive individuals on the plant who are not going to be constrained by business ethics or any ethical standards when taking out a competitor.
In response, an Oracle spokesperson said: He’s obviously nervous and defensive. He’s aware of customer unhappiness whether it be through merger issues or otherwise. We will be the market leader within the next three years.
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