Part 2: The Nails in Siebel’s Coffin

There were fundamental flaws in Siebel’s strategy. Learn why Salesforce was destined to win and Siebel was destined to lose – and how this applies to telcos’ journey to the public cloud.

Everyone talks about the great business story of Salesforce vs. Siebel, but no one talks about why Salesforce was destined to win and Siebel was destined to lose.

People were wrong because they forgot three key issues about Siebel:

• They were super tech-focused. Siebel’s focus was on the technology, not on the business. 80% of the budget of a Siebel installation was not spent on the software itself, but on system integrators coding all the on-premise integrations and customizations. This meant that organizational energy was spent on getting the system to work on-premise, not on building a better sales process.
• Every single installation of Siebel was super customized. While this might seem appealing at first (hey, I’m spending all this money, why don’t I just customize the heck out of it?), the problems start to happen the day after the installation is done. When you buy enterprise software, you’re setting up a decade-long relationship with your vendor. If you make the mistake of customizing the crap out of it, you’ve effectively cut yourself off from all the innovation coming from the vendor.
  
• Siebel was super expensive. Because Siebel was so tech-focused and customized, it was way more expensive than Salesforce. Salesforce is a web-scale product where every innovation goes to every customer immediately. They have the economies of scale to keep their prices dramatically lower than Siebel’s. And because they are so business-value focused and not tech-focused, customers love using the product because it’s so easy to set up, start using, and start realizing value immediately.

When you compare the two companies on these dimensions, it’s not even close. Salesforce has been the clear winner for decades.

So what can we learn from this?

• Don’t be too focused on the technology. The technology is important, but it’s not the only thing that matters. Focus on the business problem you’re trying to solve, and make sure the technology you choose helps you solve that problem.
• Don’t over-customize your software. Customization can be helpful, but it can also be a trap. If you customize your software too much, you’ll lock yourself into a specific vendor and you’ll be left behind when they innovate.
• Choose a product that’s focused on business value. The best software is the software that helps you achieve your business goals. Look for a product that’s easy to use, easy to set up, and easy to get value from.

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