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ComputerWire: IT Industry Intelligence

Already reeling from the effects of poor sales, job cuts and a tumbling share price, further bad news appears to come from Siebel Systems Inc's own reference customers as they are said to reveal a catalog of issues with Siebel and its software suite.

A report from Nucleus Research Inc, an analyst firm that specializes in assessing software ROI, indicates that 61% of Siebel's reference customers interviewed by Nucleus Research analysts said they did not believe they had achieved a positive ROI from their Siebel deployment.

In 78% of cases, the interviewed customers cited lack of user-friendliness as a challenge to achieving a positive ROI; difficulty in customization and performance were also key issues. In addition, 57% of interviewees said their deployment took longer than planned, and 55% said it cost more to deploy than was originally budgeted for; 17% of interviewees cited consulting or consultants as the primary challenge to achieving positive returns, while customers also experienced problems with Siebel support services. In fairness, with the exception of the support issue, these criticisms could be applied to the vast majority of enterprise roll-outs.

The results are based on a small sample of 23 customers out of a total customer base of about 3,500, and Siebel dismissed the results as being statistically insignificant and totally refutes the report. "It is not statistically accurate sample," said Phill Robinson, VP of international marketing at Siebel. "We have 3,500 customers around the world and our own research bears out a different result. It is not clear who they talked to. It is anecdotal and we would not expect anyone to take it seriously."

Nucleus found 66 customers profiled on the Siebel Web site. Following communications with each one, 23 agreed to be interviewed, 12 declined to participate and 21 did not respond to requests for interviews. In many cases, Nucleus says, the individuals interviewed were the same people quoted in the customer case studies on the Siebel site.

While the sampling is not statistically representative, what is disturbing is that Nucleus says its information sources are all Siebel reference customers who are featured on the Siebel web site and would be expected to have had positive experiences and ROI results. In response, Robinson raised the issue of why there were so many failures to respond, pointing out that in general when customers are called for customer-satisfaction surveys, they call the vendor to assess the legitimacy of the survey and suggests that this was why customers failed to respond.

Robinson stressed that the Nucleus results are at odds with its own twice-yearly customer-satisfaction surveys that have been in place for several years, and are independently carried out by Satmatrix Systems. He said the surveys show a range of customer benefits including a 13% reduction in operational costs, ROI in 12 months, revenue gains of 8%, a 23% increase in customer sales, a 13% increase in customer retention, and a 23% increase in employee productivity.

As further evidence of customer satisfaction, he pointed out that on average 50% of license revenue over the past seven years has come from existing customers, maintaining that that would not be the case if they were dissatisfied. He dismissed the suggestion that customers continue to deploy because exiting from Siebel would be too costly saying that customers could opt to deploy competitors' products on a departmental basis. Never-ending deployments as cited by Nucleus are anecdotal, he said, and may not take into account the scale of a project.

The Nucleus report also looked at the average cost of a Siebel deployment for the first three years and found that it cost more than $6.59m on an average, or $18,040 per user per year. Based on data received from the interviewees, the company concluded that during the first three years software license and maintenance costs come to $1.501m, consulting adds another $2.667m to the bill and the cost of personnel to support the deployment is an additional $2.422m.

While it would expect higher costs in the first few years and progressively lower costs thereafter, the research house which specializes in ROI analysis, found that many customers were continuing or increasing their consulting and personnel investment to support Siebel after more than two years of deployment, making a dramatic reduction in total costs after the first three years unlikely.

As a result of its survey results Nucleus advises potential Siebel customers to negotiate value based pricing and defer payment until the expected benefits have been realized. However that approach is likely to receive short shrift from Siebel. "We do per seat pricing," says Robinson. "The success of a project has many factors. There can be 20 to 30 factors outside our control that dictate whether a project succeeds or not. Making Siebel responsible would make us more of a systems integrator than a software provider."

© ComputerWire

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