What does the custom build component initiative you announced at User Week mean for Siebel?
Gartner recently said the CRM market is $23 billion -- $3 billion is packaged CRM, $20 billion is custom built. We think that's a big opportunity for us to sell into. For 11 years we said, 'Hey, we spent $2 billion in R&D on this stuff, why would you want to build this yourself when you can buy it from us and we'll sell it to you for less than $2 billion. And it won't take five years to build.'
The CRM market went from $100 million for packaged software to $3 billion, so that was a pretty good bet. Now, with outsourcing to India and China and the emergence of service-oriented architecture components, we see there are some legs to the custom build market. Some people are going to build this themselves. Today, more so than not, that's our biggest competitor. As opposed to fighting that, we came up with a strategy in how to sell into it. Today, Siebel 7 supports Web services interfaces.
We're going to go talk to people who previously wouldn't have considered Siebel and would pick WebSphere or .NET. Or who would pick what I call a toolkit vendor like Chordiant or Pega systems. We'll send them components so they can build and buy. We think that's a big market. How will pricing work?
We still price the components in line with how we price the packages. Today, on our price list there's 490 individual products. These are components that already have a pricing structure that's in place. Now if people want us to build new things, custom build can be two things. We license and they custom build or we do the custom building ourselves. Now, if we custom build, that gets into an entirely new pricing model. It gets into how much does it cost us to build this, what's an acceptable profit margin and is this a useful extension to our service? So why would a customer go to Siebel rather than, say India?
Because we have 85% of the solution. To go from 0% to 90% would cost them more than if they wanted us to take it from 85% to 90%. Maybe that 5% isn't in our current product road map. We've built a lot of the fundamentals of CRM through the years. How will Siebel and its sales force adapt?
Pretty well. If you look at it, I think this will expand the market. There was some concern when we came out with OnDemand that it would cannibalize license sales and it's done anything but that. The OnDemand deals we're doing are deals we wouldn't have been a part of previously. I think the same thing is true for customers extending the software. These are deals where they would have considered Chordiant or Pega or something like that, or else they would have just built it themselves. Now, knowing there's this other option gives us an opportunity we wouldn't otherwise have had.
Does Siebel's custom-built applications push undermine the argument from PeopleSoft and Oracle that their parts are easier to integrate?
Not really, I think our products today are easier to integrate than PeopleSoft's or Oracle's. Oracle's architecture is very closed and PeopleSoft's is very proprietary. I think our UAN [Universal Application Network] technology, which is built on Web services standards, is much more open then theirs. I don't think there's any credence to their argument. On a scale of 1-10 our scores would be two -three times better than Oracle or PeopleSoft's on that front. You've said you're not a services company, could you explain how this fits in with your partner's services offerings?
We think that in doing CRM right, people, process and technology are the three key components. We focused on the technology issues because they needed to be solved, and had we not solved those issues, there might not be an industry. That was necessary but insufficient. We assumed that customers and the partners had all this knowledge about how to do CRM right. We found this is sometimes true, but what we'd now like to do is take the learning from our 4,000 deployments and apply that across the board.
Over the last 11 years, we've accumulated a lot of knowledge and domain expertise on how to do CRM right. We plan on raising the standard for the ecosystem on how CRM gets done. We think this is an important thing for the market, not just Siebel. There's more clarity on how to solve the people issues and the process issues. We're doing this because we want our customers to get these outcomes.
Having said that, one of the three reasons Siebel became what it is in CRM is we're very partner friendly. We had a very partner-centric model from Day 1, and I would credit Tom Siebel to have a lot of vision coming from Oracle, which is not a partner-friendly company. You can count on that in the future. What we're saying is we're going to establish this blueprint and standardize in the Siebel community what are the best ways to do CRM right. Can you give an example where you would help with an implementation and where your partners would pick up?
Today, we sell the software and we'll usually put one technical account manager on the account, and Accenture or IBM might take the systems integration team. Going forward, we're going to take six different areas [of CRM needs] and this blueprint across the different services that need to be done to make sure the customer is successful. We're going to sit down with the customer and the system integrator and say someone's got to be responsible for data quality. We have this new service offering you can use, or you can call Axiom, which is one of our partners, or you can have IBM do this through Axiom, but somebody needs to do this. We don't really care who does it but if you want us to do it -- and we have rarely done this -- we can prime whole implementations if people want us to. That will still be the exception. We're going to make it very clear what are the essential components of a CRM deployment and then hold ourselves and the ecosystem accountable for doing that. I think our ecosystem hasn't done as good a job as it could have in measuring that in the past. Does that put you in competition with analyst firms like Gartner and Meta?
Not really. They provide the advice. They have been talking about CRM as a strategy of people, process and technology for a long time. The issue really isn't who said it but how you do it. Like I said Chapter 1 was about what is CRM, how do you make it work. Chapter 2 is how you do it and how you do it right. I think there should be much more focus on best implementation practices to really deploy and get the business benefits out of it. Gartner and Meta, while they give you the advice, they don't really come in and help you do it. So what's chapter 3?
I don't know yet, we're making it up one chapter at a time.