61 Percent of Siebel Reference Customers Report Negative ROI On Software Deployments.

Business Editors

WELLESLEY, Mass.--(BUSINESS WIRE)--Sept. 23, 2002

Nucleus Research Study Also Finds Siebel Installations Cost

$18,000/User Per Year; Reference Customers Cite Exorbitant License,

Consulting and Maintenance Costs as Key ROI Inhibitors

More than 61 percent of Siebel Systems' reference customers report a negative return-on-investment (ROI) on their Siebel implementations after more than two years of use, according to a report issued today by Nucleus Research (www.NucleusResearch.com).

The independent research found Siebel customers listed as references on the company's Web site experienced business results that directly contradict marketing claims from the software giant that its customers receive positive ROI in fewer than 10 months. Saddled with a per user, per year cost of more than $18,000 (not including training and hardware), longer-than-expected implementation cycle and challenging Siebel/customer relationship issues, Nucleus Research's study found Siebel's e-business solutions are an expensive proposition--even for the company's marquee customers.

A free copy of the report is available at www.NucleusResearch.com.

Nucleus Research, with corporate offices in Massachusetts and additional offices in Europe , has conducted thousands of ROI studies for Global 2,000 companies, measuring the return on their enterprise technology investments--a key concern for CFOs, CIOs and other senior executives.

In conducting the Siebel report, Nucleus initially intended to study Siebel's marquee customers--those identified on the "customer examples" section of the Siebel Web site--to learn common themes and best practices for achieving a positive ROI from Siebel. These findings could also be valuable to corporations considering customer relationship management software solutions, one of the fastest growing segments of the information technology industry. After contacting 66 of the customers profiled on Siebel's Web site, the tenor of the planned report changed dramatically, as most of the customers interviewed revealed they had spent significantly more on, and received far less from, their Siebel implementations than they anticipated.

"We expected to find best practices for achieving rapid ROI from Siebel's reference customers," said Rebecca Wettemann, Nucleus Research's, vice president of research. "What we found instead was expensive deployments, limited benefits and above all, supposedly satisfied customers who were dissatisfied with their deployments. At more than $18,000 per user per year, Siebel is clearly a costly proposition, and these marquee customers by and large don't feel as if they're getting their money's worth."

According to its Web site, Siebel claims that the average implementation allows customers to achieve revenue increase of 12 percent, an employee productivity increase of 20 percent, and an increase in customer satisfaction of 20 percent, each of which contribute to positive ROI in less than ten months.

In reality, more than 61 percent of the reference customers surveyed did not believe they had achieved a positive ROI from their Siebel investment, citing challenges in training and customization. A startling 78 percent cited a lack of user-friendliness as a challenge to achieving positive returns. "The complexity of the product is a challenge," lamented one customer. "It is not as intuitive and user friendly as we had hoped." Sixty-five percent cited rigidity and difficulty in customization as a roadblock to positive ROI.

Too Much Functionality--At A High Price Point

The Nucleus report found that most customers are using only half of the potential functionality from their Siebel implementation, even after an average implementation time of more than two years. Some customers have utilized a phased deployment strategy--as users become more comfortable with the solution, additional applications are rolled out. However, the challenge of this approach is that it significantly slows the realization of benefits while increasing and extending costs of consulting, training and personnel. As one customer said, "We will always be deploying Siebel."

Excessive functionality, complex customization and lengthy implementations have made Siebel a costly proposition. Nucleus found the average cost of a Siebel implementation--independent of training and hardware costs, which varied widely--to be $6.59 million, or an average of $18,040 per user, per year. Customers found Siebel's license price expensive compared to their other software investments, and were stymied by the company's complex pricing structures and exorbitant maintenance fees.

Many of the customers interviewed used Siebel Professional Services or a Siebel Alliance Partner to support solution development, customization, deployment, or testing. In a normal enterprise software deployment, one would expect to have higher costs during the first years of implementation, and progressively lower costs over time. However, most customers were increasing their consulting and personnel investment in supporting Siebel over time, with an average consulting spend of $2.667 million. "Siebel's rates for service are astronomical compared to other providers without providing greater value," said one customer.

Additional findings from the Nucleus/Siebel report include the following:

-- Siebel's customers suffer through lengthy, expensive deployments--Fifty seven percent of Siebel customers interviewed said their deployment took longer than planned; 55 percent said they spent more money implementing Siebel than they had budgeted.

-- Siebel's customers are paying exorbitant maintenance fees--The average annual license maintenance fee for Siebel ranged from 15 to 33 percent of the license fee, with an average of 18.2 percent, or $1,689 per user. "We pay around $100.000 a year in ongoing maintenance fees, I'm very shocked about that--it wasn't sold that way," said one customer.

-- Siebel provides contradictory quotes that belie the true feelings of their reference customers--On many occasions, Siebel's quotes on its Web site do not match the current feelings of the reference customers quoted. According to Siebel's Web site, one customer said the deployment went smoothly and on time but when interviewed by Nucleus, the same customer said, "It took longer than we had planned. They couldn't finish it. We couldn't do it ourselves. The Siebel alliance partner didn't have adequate resources, and they ended up fighting with Siebel because the project wasn't going smoothly."

-- Siebel's customers have difficult relationships with Siebel--Nowhere was there more of a discrepancy between the quotes on the Siebel Web site and what customers told Nucleus than in the comments about the customers' experience with Siebel. For example, according to Siebel's Web site, one customer said Siebel did an excellent job of making sure technical and business needs were met; when interviewed by Nucleus, the same contact said, "They're very arrogant; very full of themselves. Their service staff is unresponsive to the point that I use their services as little as we can."

Study Methodology

Nucleus Research contacted 66 customers profiled on the company's Web site. Those who agreed to participate in telephone interviews were asked questions about factors of their Siebel deployment that would impact ROI, including the following:

-- How, why and when they selected Siebel;

-- How many users are using what functionality;

-- The greatest areas of returns;

-- Project spending including software and consulting;

-- Customization and deployment strategy; and

-- Deployment challenges.

The full findings of the study can be found in Nucleus Research's published report, available for free at www.NucleusResearch.com.

About Nucleus Research

Nucleus Research is a global research and advisory firm whose analysts combine financial and technology expertise to accurately measure the true return on investment of enterprise technology initiatives throughout their life cycle. Nucleus has conducted thousands of ROI studies for Global 2000 companies such as Merrill Lynch, Lucent and Wilsons Leather, using an uncompromising set of processes and tools to evaluate the financial return of their IT assets, from selection and deployment to upgrade and retirement. Although Nucleus's ROI assessment methodology can be applied to any technology investment, the company's specific areas of expertise include Web services and integration, supply chain applications, e-commerce applications, procurement applications, CRM, ERP, e-learning, collaborative computing, and wireless and handhelds.

Nucleus Research's charter is to aid end-user organizations in making intelligent and profitable IT decisions, and it prides itself on its vendor independence and product neutrality. The company was founded in 2000 by former senior executives from International Data Corportation (IDC), Gartner/Dataquest and AMR Research, and is headquartered in Wellesley, Mass., with additional offices in London and Paris. More information can be found at www.NucleusResearch.com.