You were with Tom Siebel when he started the company and have now worked for several months under Mike Lawrie. Could you compare and contrast the two and their management styles?
David Schmaier: Both of them are world-class business people but they're different. Tom was one of the foremost authorities in applying information technology to the CRM problem. I think Tom had the vision, the know-how and the wherewithal to make this industry what it is today. As a result, there's a pretty interesting CRM market now.
Mike comes from a very different perspective. He worked at IBM for 26 years, and had an $88 billion quota and managed 90,000 people. No CEO in software has managed anything that big. Mike has a great compass for where CRM is and where it needs to go. We've known him for years. We've rolled our 60,000 or 70,000 software users with them. We've built a great Siebel and IBM alliance with Mike.
Tom was an incredibly effective founder and executive of Chapter 1 and I think Mike's going to be great for Chapter 2. And their management styles?
In management styles, I think they're a little different. Tom sets very high objectives, hires very talented and highly motivated people and is very good at setting a very clear direction and motivating the team to that direction.
I think Mike is very strong on the solutions approach. You can see this in our business outcome approach. It's not just the technology, it's how people use the technology. Mike is very genuine and people get immediately that what you see is what you get with Mike. He might have a little bit more of a consensus management strategy than Tom did, but I think both are effective in different ways.
At User Week, Mike and other executives talked about a deeper vertical push. Is there a point where applications can get too vertical?
No. I believe the customers want more vertical products, deeper, more industry-specific functionality, more best practices.
The issues in a branch bank are different from the issues in a pharmaceutical sales force automation implementation, which are different from a hi-tech multi-tiered distribution strategy. Some people may say that in this industry because they don't have the industry-specific products. It's not 99% certain. It's 100% certain that the industry is moving toward more industry specialization in both the products and the solutions. All you have to do is talk to five customers here at the conference. They want to go deeper and deeper into verticals. Mike hinted at acquisition targets in the future and those rounding out your vertical strategy. Can you give us an idea of what the strategy will be? Are you looking at more companies like Eontec ? Smaller?
Generally, history is a good judge of what we'll do in the future. We look for good technologies that complement what we are doing with very strong development teams, management teams and people with domain expertise in areas where we don't have it or where we want to supplement domain expertise.
Eontec is interesting in that it's outside of the classic CRM umbrella, just like nQuire was with business analytics. So we see increasingly that we're no longer in the CRM space but in the front office. Another term people use is customer-facing applications. In a bank, your teller network is customer facing. It does the transactions but it is also an important channel in your multi-channel banking system. Eontec focused primarily on the teller -- they also have an interesting virtual banking product line.
We just brought in a very large bank in Asia, DBS -- the first Siebel Internet banking customer. We think their focus on the Internet and teller banking channel complements our existing presence in the sales force and call center channel, so now we have sort of a complete multi-channel banking solution Are there industries that don't have vertical Siebel offerings yet?
There are some industries like real estate brokers, major league sports teams. I think real estate brokerage is pretty big. There are some, like the legal profession, that are smaller. It's not like we've gone to every single vertical. We've focused on those that have a propensity to buy CRM, and we've focused where we can build out vertical footprints and have a reasonable rate of return on our investment. Legal and real estate, for instance, are verticals where OnDemand might make a lot of sense. Those are companies that tend to spend less money on IT. In the future with OnDemand they may not be the same verticals we're in today they may be new verticals. But the process by which we build verticals -- building domain expertise, then the product and then our go to market strategy -- we'll do that the same whether it's hosted or not. Speaking of OnDemand, some of your competitors in the hosted market say Siebel is just offering a hosted product so that so it can sell people into its on-premise version. Can you answer that and give us an idea how much of your OnDemand business is with small and medium-sized businesses (SMBs)?
OnDemand has been a huge success here and we are 110% committed to that deployment option. From Q1 to Q2, the contract value went up 33%. From Q2 to Q3, it went up 38%. You don't see many parts of the software industry go up that fast. OnDemand and analytics are the two fastest growing businesses at Siebel.
We're committed to the SMB channel and actively growing our go-to-market partnerships and our sales force there.
The results speak for themselves. We continue to invest in the product as you see with the vertical products. We're going to out-invest the competition in building better products. We're going to take advantage of our core competence.
Finally, there's no business reason for us to get people out of the hosted model into the on-premise model. At $70 per user per month, over time that's a lot of money. All we want to be is the No. 1 provider of every single software segment in CRM. How much is selling into your install base
Some of it. I mentioned oDesk and Norstar [during the User Week keynote] which are tiny companies that we would previously not have sold to before. There are new ones like a division of HP, a division of Kodak. We think it has multiple applications and we're going to go after all of the above. Does a combined Oracle-PeopleSoft help or hurt Siebel?
I don't see any direct correlation. You could say that if they end PeopleSoft products and get rid of a couple thousand employees, that's going to eliminate one of our competitors. Certainly, PeopleSoft had more success with CRM than Oracle, although we don't consider either of them to be major competitors in this space. We don't think it has a material impact on us.
Read Part 2 David Schmaier's interview about Siebel's custom-built application plans and customer blueprint