For once, Steve Rogers is not talking about customer relationship management. The managing director of Siebel in the UK is more preoccupied with security at present, his concerns prompted by the war in the middle east. For Siebel, security has been a talking point in the US for some months, but little has been heard about it in the UK before now.
Siebels’ newfound emphasis on security provides the company with a way into one of the few bright areas of IT spending in today’s economic gloom. Homeland security remains very much an American concept at present, but as governments everywhere face increasing terrorist threats following the Iraq war, they too are taking an interest. Rogers notes: “One of the huge political issues for governments around the world is the ability of the security agencies to share information. That’s crucial, because unless they can pool what they know about terrorist threats, all the information they gather will count for nothing. Sharing information properly could help to make future attacks avoidable.”
But how can Siebel – whose expertise lies firmly in the CRM space – hope to move into the prevention of terrorism? Rogers replies: “There are lots of similarities with CRM, in fact. Traditional CRM applications are about building a profile of individual customers and consumers, and responding to their needs. In the same way, you can use intelligence information to build up profiles of suspected terrorists, both as individuals and as cells. You can then use that profile to help you to make decisions on how to respond to those suspects’ behaviour.”
When enough relevant information is fed into the system, he says, Siebel’s predictive modelling software can be used to anticipate how the suspects will behave. It can also be used to examine the behaviour of large numbers of people, in order to match them against the patterns of behaviour exhibited by known terrorists. “You can look at their travel patterns, their visa applications, perhaps where they get money from and where it goes to, and if these match [the patterns shown by terrorists] that will ring alarm bells,” he explains.
The company’s homeland security suite is currently being used by the US Transportation Security Agency, set up after the September 11 2001 attacks. Siebel is currently talking to a variety of UK government departments, local government agencies, and airlines about its homeland security products.
Outside of security concerns, central and local government are also key focuses for the company’s sales effort for the rest of its CRM products. Attention has switched firmly to the public sector now that Chancellor Gordon Brown has expressed his desire to update government IT – and now that private sector sales have dropped off sharply.
Rogers says the company’s public sector practice is performing well. He points to Leeds City Council, which used Siebel’s products to create an electronic social care system that has saved more than half a million pounds. Phill Robinson, vice president of international marketing, chips in: “Government to citizen CRM is a great area for us, and a technological challenge – with private sector clients, you are probably dealing with tens of thousands or hundreds of thousands of customers, but when you talk to government agencies like the DVLA or the Post Office, suddenly you are talking about tens of millions. You have to be very scalable.”
Although the company is seeking further expansion in Europe against its indigenous rival SAP, Siebel chose not to take its own stand at Cebit this year, but instead showed off some of its products on the stand of its new partner, Microsoft. Robinson says the decision not to exhibit was a difficult one: “It’s a hugely emotive topic. But it’s a very significant outlay to justify, and the returns are often not tangible.”
The partnership with Microsoft has puzzled some customers, as Microsoft has been striving to encroach on the CRM market through the acquisitions of Navision and Great Plains. Many have seen Microsoft’s move as opportunistic, wooing Siebel as a partner for now just in order gain a foothold in many CRM accounts, which the software giant will then use to its advantage in the future when it is ready with further developments of its own CRM products. But both Robinson and Rogers deny this is the case. “Look at the software industry. Companies like IBM and Microsoft are rivals but they work together on some accounts, because that is what the customer wants. We don’t have [as] much overlap with Microsoft [as IBM] so it makes even more sense for us to make these partnerships with powerful brand names,” Rogers argues.
For the same reason, Siebel will continue to support both Microsoft’s .Net and the rival standard J2E in web services. Rogers, until recently an Oracle employee, declares: “There is no way on God’s earth that Oracle will support .Net, so we will continue to support both. IBM we believe will support both too. It’s the logical thing to do.”
Despite persistent speculation about the financial strength of the company, Rogers insists that licensing revenue for the fourth quarter of last year was up 24 per cent on the previous quarter. He prefers to use this measure than to compare revenues with the previous year as “last year was a rebasing for everyone” – in other words, the past two years have been so bad that we should take this year as the year zero and measure future performance from here. Robinson adds that the company is “rock solid”, having banked $500m in profits last year and holding $2bn in cash. Rogers says no more redundancies are on the cards.
If it prefers to avoid comparisons with other years, Siebel is even more keen to avoid comparisons with other CRM vendors. “Our real rivals are not the other CRM vendors, as we see it,” explains Robinson carefully, “our real rivals are the bespoke software already installed in many companies.” To illustrate his point, he says that if you include all of the handcrafted software, the global CRM market represents “a $24bn pie”, of which Siebel holds only 6 per cent – but as about 80 per cent of this market is made up by the bespoke systems, the scope for growth is very large. “The challenge is to show that there is more economic benefit to [off-the-shelf] software,” he says.
In addition, he argues that the $24bn companies spend on customer-focused applications pales into insignificance beside the $90bn that is spent on integrating different computer systems within companies. Siebel, he believes, can eat into that market too by persuading companies that it offers a single integrated system that can sweep away many of the systems already in place, at a lower price. “Integration costs companies a lot of money,” he points out.
Whether these markets turn out to be real remains to be seen. While Siebel needs to “rebase” its results in order to show decent growth, the company cannot be out of the woods financially. As the economy still shows little sign of lifting, CRM vendors face another tough year. The public sector may provide a refuge, and homeland security another string to the company’s bow, but Siebel needs to demonstrate it can dominate a recovering SAP, and tame the predatory Microsoft, before the market will be convinced.
Fiona Harvey writes for the Financial Times