'Dirty tricks' in the CRM market

All's fair in love and customer relationship management...

By Alorie Gilbert PeopleSoft, Oracle and Siebel Systems have historically touted lists of "customer wins" to lure new clients, but anemic spending on information technology has forced the campaigning to quickly turn negative. With fewer deals being signed, the fight for new business has become intense. When courting customers, a competitor's client defections and customer complaints are the weapons of choice in the brutal business software market where perception counts. Barbed exchanges between software companies have included everything from charges of unfair advertising to customer losses. "The whole worldwide IT market is declining, and everyone is fighting for market share," said David Schmaier, an executive vice president at Siebel. Siebel should know. The leading provider of customer relationship management (CRM) software found itself on the defensive this week after a survey highlighted complaints from its customers. Meanwhile, rival PeopleSoft boasted about a handful of customers it snagged from Siebel. Nucleus Research, a technology research group, reported that out of two dozen Siebel customers it surveyed recently, more than half reported that the cost of their Siebel projects exceeded the payoff. The report echoed recent studies indicating that nearly half of all CRM projects fail to meet customer expectations. CRM software is designed to help companies keep track of information about their customers and sales opportunities, as well as fine-tune customer service and plan marketing campaigns. "These are Siebel's reference customers and we expected to find customers overwhelmingly pleased with their deployments and able to offer insight into their paths to return-on-investment success with Siebel software," said Nucleus in its report. "What we found was a surprising percentage of respondents dissatisfied with their deployments and their lack of positive returns." Siebel denied that it has a customer-retention problem, noting that it is signing up hundreds of new customers and calling the number of customers surveyed "statistically insignificant". Nevertheless, the report could hardly come at a worst time. Siebel's second-quarter software licensing revenue was down 40 per cent from a year ago, while SAP's fell 23 per cent, and PeopleSoft's dipped 20 per cent. As the CRM software leader, Siebel is a popular target. Although the company has been humbled by declining sales, revenue controversy and a sliding share price, it still has an estimated 45 per cent share of the CRM software market, with just over $2bn in revenue last year. Just behind are SAP with 16 per cent, PeopleSoft with eight per cent and Oracle with seven per cent, according to investment bank ABN AMRO. (Siebel's rivals also sell other kinds of business applications, and most don't break out revenue separately for their CRM products.) Siebel beat SAP, PeopleSoft and others to the CRM market by several years, and made inroads selling specialized applications to its rivals' customers. Now, say analysts, SAP, PeopleSoft, Oracle and others want to win back business they lost in those years. "The competition is very, very intense out there," said Josh Greenbaum, an analyst at Enterprise Applications Consulting. "To a certain extent it's gotten personal. These companies feel Siebel has stolen their customers and they're pissed off." In one example of retaliation, PeopleSoft recently bragged that it has displaced Siebel as the CRM software provider to six different companies since April. They include IT systems integrator Crestone International, supply chain software company Manugistics, telecommunications equipment maker Norstan and database company Sybase. Crestone and Sybase, which are both PeopleSoft business partners, said they are chucking Siebel technology in favour of PeopleSoft. One reason is because they already use PeopleSoft applications in their book-keeping and human resources departments. By switching to PeopleSoft for all these needs, the companies said they will have fewer software environments to maintain and fewer development tools to support. Siebel doesn't make book-keeping, human resources or other so-called back office applications, and that's now putting the once high-flying software company at a disadvantage, analysts say. More companies are demanding one-stop shopping for business applications and seeking back and front office, or CRM software from the same source. Also, SAP, Oracle, PeopleSoft and JD Edwards are improving the quality of their CRM products, analysts say. Crestone, a 300-person IT systems integration company, said difficulty in working with Siebel helped to justify the move to PeopleSoft. After three years of using Siebel's software, the company expects to switch to the new PeopleSoft system in November. "They nickel-and-dimed us for all types of things," said Sean McCormack, Crestone vice president of operations. "They charged us separately for development tools, for instance. Every time we turned around there was something like that." JD Edwards, another Siebel competitor, said recently that Fidelity Investments purchased a set of its business applications that will replace Siebel's software. But both Fidelity and Siebel denied that claim. Instead, both companies said Fidelity chose JD Edwards' CRM applications for a project in its employer services division. As many as 7,000 call centre agents in its retail division - a separate business unit - will continue to use Siebel. Siebel fights back: For the second part of this special feature, see http://www.silicon.com/a55735