Network Advances PSINet's Prospects

Network Advances PSINet's Prospects

By Richard McCaffery
Staff Writer

Fast-growing software company Siebel Systems Inc. plans to elbow its way into the government market, targeting its call center and sales products to federal, state and local customers.

The San Mateo, Calif., company will have a dedicated government division in place by year's end, company executives said. There are currently 20 employees selling software to commercial customers at its McLean, Va., office.

"We're going to focus a lot of resources on this," David Schmaier, Siebel's senior vice president of products, told Washington Technology. "We think it's a huge opportunity for us."

The company's hottest market now is the financial industry, which generated about 30 percent of its $119 million in 1997 revenues. Schmaier said the state, local and federal market business should eclipse this sector.

Founded in 1993, Siebel claims to be the fastest-growing client/ server applications software company in history, beating out stalwarts such as PeopleSoft Inc., Pleasanton, Calif.; Oracle Corp., Redwood Shores, Calif.; and SAP AG, Waldorf, Germany. It took Siebel just four years to top the $100 million mark.

Company officials would not forecast 1998 revenues, although they pointed out Wall Street estimates the company will pull in about $360 million this year. Edgar Bierdeman, an analyst at Dakin Securities Corp., San Francisco, thinks they'll do better than that. "I think they'll blow it away," he said.

Siebel targets five markets: the financial community, telecommunications, pharmaceuticals, insurance and consumer packaged goods. The company has a dedicated sales force as well as programmers and support personnel that help target each segment.

"In the government area, we plan to do the same thing," said Schmaier.

Nearly 100 percent of Siebel's customers are commercial. Clients include Microsoft Corp., Redmond, Wash.; PeopleSoft; NationsBank Corp., Charlotte, N.C.; The Chase Manhattan Corp., New York; and MCI Corp., Washington.

Siebel sells a brand of software called Enterprise Relationship Management (ERM), which enables corporations to gather and share information about customers. It uses this software to set up call centers and other customer information systems.

The Internal Revenue Service, for example, could use customer information gathered and stored by Siebel to help customers with questions during tax season, he said.

ERM, or customer management software, is a new industry that is growing rapidly. Forrester Research Inc., Cambridge, Mass., estimated the market at $1 billion in 1997. It is growing at 54 percent annually and expected to hit $3.5 billion by 2000, said Tom Gormley, senior analyst at Forrester.

The company competes with software firms like Vantive Corp., Santa Clara, Calif.; Trilogy Development Group, Austin, Texas; and Clarify Inc., San Jose, Calif. But Siebel, which has blossomed to 1,200 employees though internal growth and three acquisitions over the last 12 months, now has a market value of $1.7 billion, more than eight times the size of Vantive and Clarify.

Companies making waves in the enterprise resource planning market, such as Oracle and Baan Co. of Reston, Va., and Barneveld, the Netherlands, are developing their own ERM applications or buying companies that develop them.

The push among government agencies to focus more on the customer is driving Siebel to become a serious competitor in the public sector. Agencies like the IRS, U.S. Postal Service and even state motor vehicle departments are looking to serve customers better, Schmaier said.

"We think there's a huge benefit to government, state and local agencies using our software," he said.

Bierdeman agreed. "It makes a lot of sense," he said.

Schmaier declined to disclose whether the company has picked someone to manage the division or how many employees will be hired to get the government unit on its feet.

He did say the company is ready to sell products to the government today, though Siebel plans to customize software for the government the same way it does for its other customers. For example, the company could duplicate tax forms online so they could be stored electronically.

Siebel plans to take its commercial sales model and apply it to the government, using its own sales force to market the products. Integrators like Andersen Consulting, Chicago; PricewaterhouseCoopers LLP, New York; and Cambridge Technology Partners Inc., Cambridge, Mass., would install them.

Schmaier said the company has approached partners about its move into the government, but he declined to say whether any partnerships have been formalized.

Andrew Sung, senior analyst at Input, a Vienna, Va. research firm, said the year 2000 crisis will make it difficult for the company to break into the market because government agencies are focused on repairing and replacing existing software.

"Except in the case of the year 2000 census," he said. "The Census Bureau is setting up call centers for gathering this kind of information. That might be the place to go to get an in in the government market."