A host of opinions on hosted CRM.

The most difficult part of my job is trying to communicate with all the companies with which I would like to speak on a daily basis. A case in point is Siebel, which recently brought on board George Shaheen as its new CEO. Siebel has had some financial challenges as of late and, as a result, Shaheen was asked to take the reins of the company and lead the CRM behemoth to success.

[ILLUSTRATION OMITTED]

When I first heard about the personnel change, I decided I wanted to interview George Shaheen. I came up with some pretty good questions. I imagined my feature story surrounded by comments from Salesforce.com, one of Siebel's biggest competitors, as well as a company called Contactual (formerly White Pajama).

My plan was perfect (so I thought). I would have Siebel's positive comments, balanced by perhaps contrasting opinions of Salesforce.com. I would seek out the viewpoint of Contactual, a company that focuses on hosted contact center solutions and whose services often coexist with those of Siebel and Salesforce.com. I saw my story really coming together.

Of course, Murphy's Law dictates that the perfect story will never be perfect and, in this case, Siebel told me that George Shaheen was not available for comment. I was shocked--most companies parade their CEOs in front of the media like a stuffed turkey float on Thanksgiving. Not only did Siebel personnel decline my request for access to Shaheen, they did not offer me an alternative Siebel employee to answer my questions. A bit of digging showed that Shaheen was busy putting together a turnaround plan that was due about week after I asked for his comments. I guess everyone has their priorities.

As the saying goes, if you want something done right, do it yourself. But how do you interview someone without his or her assistance? I imagine that if book authors can write unauthorized autobiographies, perhaps I can write the world's first unauthorized interview. The idea might fly, and I figured if I could submit the story late enough, my editors would have to accept the story "as is" and not question my brilliant (or crazy?) scheme. [Editor's note: Fat chance, Rich.]

That said, following are many of the questions I sent Shaheen. I wrote the answers, too, but that's beside the point.

RT: Rumors of your retirement are filling the pages of other magazines, yet you are obviously not retired. Do you care to comment?

RT: When I saw the opportunity to lead Siebel, I decided it was a challenge worth taking. I never formally announced my retirement, and Rich, you should know better than to believe what you read in supermarket tabloids.

RT: Why are you the right person for this job?

RT: Having led one of the largest consulting companies in the world (Arthur Anderson Consulting/Accenture), I have seen many Siebel implementations from the standpoint of the consultant/integrator. This unique experience will help me as I map out a strategy to help Siebel grow into the future.

RT: I loved your past company, Webvan, and although it was a dotcom casualty, what experience did you bring to your new position from the now-defunct online delivery company?

RT: Leading Webvan was a great experience, but like so many good ideas, the environment did not allow for our Internet delivery company to be successful. My experience in building up that company so rapidly will allow me to react just as quickly as I take the reins of Siebel. I believe speed and rapid response to changing market conditions will be the difference between success and failure in the market.

RT: You have the ability to sell software, services and a combination of both. Why is this a strength and, honestly, why is this a weakness?

RT: Being flexible enough to serve the diverse needs of our customers is the reason we chose the hosted and in-house strategy. Simply stated, some customers require hosted solutions, others require software and those in a third category require both. By having a more complete menu of choices, we feel we are in a great position to serve our customers' needs. There is no weakness in a strategy that allows us to meet the needs of our customers, regardless of what those needs are.

RT: Integration cost and hassle were a few of the reasons many companies gave up on CRM. Are times different now?

RT: Yes. We are always working to simplify CRM implementations. Newer technologies and experience allow us to achieve greater results in less time than ever before.

RT: Are you shifting focus to business intelligence or is CRM still a viable business?

RT: We see synergies between the two, and the BI market has tremendous potential for growth.

RT: In your opinion, what is the state of customer service and relationships in the U.S.?

RT: Customer service levels can always improve, and we are in the business of helping companies provide increasingly better service.

RT: What keeps you up at night?

RT: I often worry that someone will write an unauthorized interview with me that is astonishingly accurate.

RT: What will we remember you for at Siebel, assuming you do retire one day?

RT: My goal is to continue to keep Siebel on the leading edge of providing solutions to customers that help them run their businesses better.

Another Perspective

As I mentioned previously, for balance, I reached out to Salesforce.com. The rivalry between these two companies is legendary, and in the CRM space, Tom Siebel and Marc Benioff seem to have a relationship like that of Bill Gates and Larry Ellison in the IT market. Here are the results of my interview. You will probably notice right away (after the first answer, in fact) that the real Marc Benioff responded to my questions, not the imaginary Benioff.

RT: What do you think of the "changing of the guard" at Siebel?

MB: I don't think there is a more difficult job in this industry right now than making that company a success.

RT: How do you see this change affecting the market?

MB: For Siebel customers, uncertainty creates confusion.

RT: Are some market segments such as travel or insurance more predisposed to going hosted?

MB: The power of our approach is that we appeal to customers in a broad range of industries. That's because our system is so customizable. Businesses can easily customize our system to meet their unique needs. No one else can say that.

RT: Are you seeing more of your customers asking you to sell suites of applications?

MB: Our Customforce tool has unleashed a tremendous amount of innovation and creativity among our customers. When they realize how flexible our system is, they are soon building their own custom apps. We have revolutionized this process and, with it, an industry.

RT: Where will the suite market go in the future?

MB: I think customization is the future. One customer of ours said it best: "Why should I change my business to suit my software?" We completely agree. Customers are tired of inflexible software that doesn't meet their needs.

Another Voice

I then reached out to Mansour Salame at Contactual (www.contactual.com). Mansour founded the company and, more recently, reacquired the company back from investors during the downturn. Now the company seems poised to take off.

RT: What do you think of the changing of the guard at Siebel?

MS: I liked Lawry. I also like Shaheen, and having worked for him, I think he is a good fit for the position. However, the challenges confronting Siebel and Lawry haven't been addressed. In my opinion, Siebel still needs to shift strategy and acknowledge the growth and success of the hosted model, which is largely driven by small and midsized customers. Lawry and Siebel didn't have much in the way of experience with SMBs. It will be interesting to see if Shaheen makes this adjustment and shifts strategy.

RT: How do you see this change affecting the market?

MS: This is the third CEO in 12 months, and we haven't seen much of an impact during this extended period of change. All three CEOs have minimal experience with solutions geared for SMBs and departmental instances. Based on the recent past, we don't anticipate any impact on our business. This change, in a limited sense, will affect the market, but the dynamics are really limited to those impacted by an extended period of leadership change at Siebel.

RT: What is happening in the hosted vs. in-house market?

MS: There is a clear shift in the marketplace. No matter how you slice the market for contact centers, it's hard to deny that hosted solutions are on the rise. Every month, more and more decision makers are choosing to go with hosted contact center solutions. That's certainly our experience.

RT: How do you see the hosted contact center market differing from hosted CRM?

MS: Both CRM and hosted contact centers address non-core areas for businesses. But the fundamental difference is that the contact center is mission-critical from an operational standpoint, and CRM products are mission enhancements; that is, if the CRM goes down, it's a nuisance, but if the contact center goes down, it's a disaster (most of the time).

RT: You recently told me your average customer size is growing. Why do you think this is?

MS: It's really all about credibility. The customer base is increasingly composed of larger and larger customers, because one satisfied customer at 100 or 200 seats leads to another.

RT: What are customers saying about Contactual's new name, now that they have had time to digest it?

MS: Our loyal SMB customers who started with White Pajama four years ago have mixed opinions. But in general, people like it. It's a name that is becoming synonymous with on-demand contact centers. White Pajama is a proud part of our history, but it doesn't really reflect the company's business, product or personality anymore--we're much happier with the attributes that Contactual communicates.

RT: How do you foresee the market share of hosted solutions in contact centers of the future?

MS: I believe that in five years, 50 percent of new contact center solution purchases will be on-demand solutions.

RT: What is the one problem you wish hosted technology didn't have?

MS: The nature of hosted products creates a relationship with the supporting infrastructure in place. Our partners in telecom are replacing and improving infrastructure, which creates fewer instances of telecom-related problems. But the stability of the Internet and telephony infrastructure is the one piece of our customer experience outside of our control--when there are problems there, it's definitely the type of problems that I wish we didn't have to deal with. In essence, we end up debugging telco and Internet networks. It's necessary, though, as we want to support our customers, and it will become less and less required as the underlying infrastructure improves.

RT: What excites you about the future?

MS: There's really so much to be excited about. Our partnership with NEC is really a model for other partnerships in other geographies. And I can't wait to unveil our new, unannounced partnerships. Equally exciting will be our product enhancements in the upcoming release. But perhaps the most exciting thing is seeing developments outside of our control--developments from our customers. For example, we have customers in healthcare, retail finance and security developing custom internal applications and business practices on top of Contactual technology. I love seeing innovative business concepts sprout from our customer deployments--things I never anticipated or even thought possible. Seeing the product fashioned to make people more secure, or help people get medical care or relief after a disaster, are things that get me excited and keep me enthusiastic for a long time.

The Invitation Is Open

I must finish the story by saying that Siebel has an open invitation to contribute to my column in the future, and I sincerely hope they take me up on the offer. As an industry, we all need Siebel to do well. Companies look to Siebel as a barometer of CRM health. With that said, the world is changing and companies are faced with more alternatives when they choose their CRM implementations. On the one hand is the hosted solution route, and on the other hand, many vendors are rolling out software suites with CRM as just one application in a family of products. Shaheen has a tremendous amount of experience and I am looking forward to seeing what he can do with Siebel--a company with an incredible brand name and reputation. Still, the clock is ticking, and Shaheen needs to act quickly to increase sales and grow the stock price to keep his shareholders happy. One common theme about which I have been reading and which was also echoed by Salame is that Siebel will likely have to focus on smaller customers to make up for the sales deficit being felt in the large enterprise market. A smart move for them might even be to purchase Contactual, which has a great handle on this space. Remember, you read it here first.

Sincerely yours,

Rich Tehrani

Group Publisher, Group Editor-in-Chief

[e-mail]

PS: At press time, rumors regarding Oracle acquiring Siebel started to circulate. I could not confirm the authenticity of the rumors at the time of this writing.

By: Rich Tehrani, Group Editor-in-Chief, Technology Marketing Corporation