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The real deal on integration

Can Siebel meet the market's challenge?

It amazes me to hear all of the fussing in today's market around the topic of integration. To hear people talk, it seems that the topic of integration has just been discovered, but in reality it has always been the key to making any customer-facing technology initiative successful.

After all, integration, or the lack thereof, is why the term "customer relationship management" was created in the first place. CRM emerged as a solution to the fact that, prior to the mid-1990s, companies typically didn't integrate their sales, marketing and customer service applications. So the term "CRM" became synonymous with the idea that you needed to buy all of your customer-facing applications software from a single vendor -- pre-integrated.

The idea gained popularity, and a multibillion dollar market emerged. No company capitalized more effectively on the CRM trend than Siebel Systems Inc. -- and as Siebel assumed the mantle of market leadership, the buyers came en masse.

Unfortunately, many of the promises of CRM were not delivered, and the market is now in a place where it has not only lost revenue, it has lost credibility. The reasons behind this are many but, ultimately, the "360 degree view of the customer" has turned out to be like the Loch Ness Monster -- oft-discussed, but seldom-seen.

So there are two questions. First of all, what will it take for the CRM market to rebuild credibility and regain momentum? Second, in this next phase of CRM, will Siebel be able to maintain leadership?

I think the answer has to do, again, with integration -- the topic that drove the CRM market in the first place. Reservoir Partners just authored a report on the impact of Web services on CRM, and we confirmed one very critical fact. Web services technology is lowering the complexity and cost of integration -- not by a few percentage points, but by orders of magnitude. This implies, quite simply, that the need to get all of your CRM from a single vendor will soon be unnecessary. You'll have the ability to mix and match applications and tools from multiple vendors (along with hosted systems in-house) in the foreseeable future, and this fact is shaking the foundations of the entire enterprise software industry.

In other words, the idea behind CRM is as on target as ever. But today's delivery model is all wrong.

Consider Dell, for example. It drives me nuts when I go to conferences and hear supposed experts claiming that Dell's success is due to "CRM." Dell's customer service stinks. Trust me -- I have firsthand experience, and I know many of you do as well. Nonetheless, why was Dell the only PC maker to grow in 2002, while the rest of the industry shrank?

Integration. Not between ERP and CRM. Not between sales and marketing. Between, over, throughout and within every operating function of the company -- and with their trading partners in both the supply and demand chains. In other words, integration that is far bigger in scope than the way most of us think of CRM.

So what is Siebel (and what is a Siebel customer) to do? Good question.

The bad news is that the days of multimillion dollar, multi-year, big-bang CRM deals are over. Gone for good. The enterprise software business model is fundamentally -- and permanently -- broken.

The good news is that Siebel, as the market leader, probably knows better than anyone what makes its clients successful with their customers. And a technology change pales in comparison to this knowledge. Siebel also seem to "get" the shift to Web services -- the company's Universal Application Network (UAN) initiative clearly demonstrates Siebel's commitment.

So here's the challenge: Siebel needs to find a way to sell its expertise in managing customer relationships -- even at the cost of selling less software. UAN needs to become truly open to succeed, as opposed to simply being an avenue for selling more Siebel licenses.

Being willing to cut off your arm to save your butt is what's going to differentiate the (few) winners from the (many) losers in this market. It means that being able to integrate with other applications, even your closest competitors', is no longer just something you pay lip service to; it needs to become a reality. It means embracing new sales, marketing and delivery models -- like the hosted model popularized by, and the reseller channel being developed by Microsoft.

Tom Siebel has proved many times that he is a leader, with one of the strongest management teams in this industry. This transition will put that leadership to the ultimate test.

What do you think? Will Siebel be able to meet the market's integration challenge? Send us your two cents

Chris Selland founded Reservoir Partners in October 2001. He founded the company with a successful track record in developing and implementing customer-focused marketing strategies and building high-impact, highly visible brands.

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