According to a former executive at Siebel Systems, the once-dominant CRM powerhouse was in severe disarray in the months leading up to its acquisition by Oracle in 2005, as it began to sink under its own bloated weight and a customer-be-damned product development strategy.
In a recent interview, Brad Peters, who along with his colleague Paul Staelin spawned Siebel’s analytics business, painted a gloomy picture of a company that had been incentivized to laden its CRM product with superfluous features that made the software so complex that customers had to spend outrageous amounts of money in consulting fees just to be able to use it. So when Salesforce.com came along with a SaaS model that made CRM exponentially cheaper and easier to use, Siebel collapsed. Peters and Staelin embraced the model, and went on to found Birst, a San Francisco-based provider of business intelligence in the cloud.
Siebel’s ultimate failure, Peters explained, had its roots in the client/server revolution that began in 1995:
By 2005, these applications were huge, and the whole model for enterprise software development was really about creating the most complex thing possible so that you could tick off a bunch of features that you said you did. Whether or not anybody who actually used them enjoyed doing that, or whether or not this thing was actually able to be installed, was beside the point—we didn’t care. So we had these giant things, that if you had an army of people to install it and configure it, and you didn’t mind inflicting massive amounts of pain on your end users in the organization, it more or less did what it was supposed to do—which was great, because you couldn’t do anything before.
Siebel thrived under that model for years—until the disruptive SaaS model emerged. As Peters explained it:
Salesforce came in, along with RightNow and Concur and Taleo and all of the SaaS guys, and said, “You know, no one likes installing these things. These things are horrible from an end-user perspective. What if we were able to preview all of that for you? What if we built into the software not just the features and functions, but also the deployment of the application and usability? So we get measured by whether people use it, and you don’t have to install it. We will take responsibility for the management and upkeep of this thing.” At Siebel, we had incentives to include all sorts of crazy, hairy features, because we weren’t responsible for installing it and making it work, or teaching people how to use it. It was somebody else’s problem. In the SaaS model, that became the problem of the software provider, and when you think about the problem in that respect, you design things very differently. In the early days, Salesforce had a very small feature footprint compared to Siebel, and Siebel didn’t even know them. And then all of a sudden, out of nowhere, by 2003, 2004, they were everywhere. It was very difficult for Siebel to argue that you really needed all of those features, when Salesforce was so dramatically easier to deploy and install. You were stupid to go with Siebel when you could go with something like Salesforce. They completely disrupted the delivery model for CRM software—as Workday is doing for HR, as NetSuite is doing for ERP, these are just much, much simpler alternatives. The vendors’ engineers are actually thinking about engineering into the product how you consume it.
Peters said he and Staelin saw the writing on the wall—their analytics business within Siebel was growing, but the CRM business was sinking fast. They left Siebel several months before the Oracle acquisition:
The core CRM products were just degenerating—you could see every quarter that Salesforce and all these other guys were just eating our lunch. It was not a fun place to be. It was still a CRM company, so even though analytics was doing well, the core management at Siebel didn’t really get what we did, so we had a ceiling above us. Oracle, to its credit, understood the product better than Siebel did.