Sizing Up Siebel
Siebel Systems Inc. is making a big push into business intelligence and analytics. It showed a slide at its user conference two weeks ago that listed IDCs top vendors for customer analytic applications, and it listed Siebel as No. 1 in market share and SAS No. 2. Thats based on numbers that Siebel provides IDC. We cant do much about that. Put Siebel into perspective. Last year, I think their revenue was $1.4 billion, and ours was $1.34 billion. About two-thirds of their revenue is from services. So you figure, at best, they had less than $500 million in software revenues, whereas we had $1.3 billion. So from a pure software standpoint, we are two to almost three times larger than Siebel.Their softwares so difficult to install, you have to spend a fortune to have it installed. Thats where they make their money, on installing the software. Thats why theres a lot of other models that have popped up in this sales force automation area. Like Salesforce.com, theyre doing extremely well. That model where somebody else worries about the software and keeps it up and running is pretty good for that area.Would you consider using a hosted service like that for your companys sales force? Actually we have our own software that weve written. Its being used worldwide, its Web-based. We looked at the cost of implementing somebody elses software for that and we just felt wed rather develop our own. But theres a never-ending list of features that people want to add to it. Thats strictly an internal initiative, you still have no plans to branch out into that kind of operational software as a commercial venture? I dont think so. I think the market is pretty saturated with that particular type of software. The Salesforce.com model is such a good model, I think even large companies are now using it. That model seems to be working for that space, but would or could a hosted model like that work for SASs business? Were looking at probably $40 million in revenue this year from our hosting business, our ASP stuff. Were doing quite a bit of analytical work where were getting terabytes of data from one of the large banks and were doing quite a bit of analytics work on that to help them understand their customers better. Plus we are hosting some drug compound applications for some of the pharmaceutical companies. Were doing a lot of Web analytics as well. Getting back to the Siebel question, do you take them seriously as a competitor? No. I dont believe the numbers that theyre quoting. Im sorry; I dont believe them. If they only had $500 million in software revenue, how could $300 million of that come from analytics? Its just unbelievable. Unless they think of their whole software offering asnow theyve just renamed itanalytics. I mean, give me a break, that numbers way off. IDC numbers come directly from the vendor. Theres no validation. I know we have a hard time when we turn our numbers in, trying to fit all the different revenues we have into the different buckets that they have. Obviously Siebel put as much as they could into the analytical bucket so they could claim the bigger numbers. Actuate is pushing an Eclipse-based framework that all companies would share and build technology off of, mainly in the query and reporting area. Is that anything that SAS would have any interest in? Actually, were on the board, and Eclipse is a lot of our desktop. Eclipse is designed for desktop users, so its Java-based desktop stuff. Its got a good set of components in it and we are on the advisory board. It is one of our standards. But Actuate, they basically threw a bunch of components in. Theyre only good if you want to build an application, you get a bunch of components that help build an application. I think they gave them away because they couldnt sell them. Im not real clear on that, Ive just had some very brief conversations about that. But this is an IBM initiative, they started it. So Eclipse is in SAS 9 today? Yes. It provides a framework. If youve got three different departments writing desktop applications in J2EE, then at least youre going to have some common look and feel. There have been a lot of intellectual property lawsuits going back and forth in the business intelligence space between companies like MicroStrategy, Business Objects, Cognos, Actuate. Has SAS ever been involved in this type of dispute? I think our last intellectual property [issue] was back in 1984. Its been a long, long time. Do you think theres any merit to any of these lawsuits? First of all, we have a basic problem with the U.S. patent office. Starting about nine years ago, they just opened the flood gates, any software patent was now going to be allowed. It had been not allowed from the early 60s on up until 1995. So we had a 35-year period where you could not patent software, you could not patent algorithms. And then there was some judge ruling about putting stuff in [online] shopping baskets and all of a sudden the judge ruled that anything is patentable. So now youve got 35 years of prior art sitting out there in corporations all over the globe, just about everything that ever has been developed or invented for software is sitting out there somewhere. And then you have a bunch of these people come along and start to say, OK, Im going to patent this, Im going to patent that. Patents have gotten to the point now where we do them just for defensive purposes, so if someone tries to have a claim against us, we can say, Oh, weve already patented that. I personally think that patents ought to be not allowed for software. They ought to throw out everyone that there is. For software, what weve always used has been copyright and trade secret. That has been sufficient for all the years that weve been in business to protect our software. The idea that somebody could patent [software] is just wrong. The Patent Office, rather than sitting up and doing a better job, they simply stamp everything approved and theyll say, Well, let the courts worry about it. The entire time during the Clinton administrationand I dont know how much its changed nowthey would charge $1,500 per patent application and that $1,500 went into the general fund and the patent office got about $200 per patent to pay the patent researchers to do their jobs. So they were incredibly underfunded. And they were dumped on with tons and tons of patent applications that had not been properly researched. There was just no other patent existing that this patent covered even though the software out there had been out there for years. Some guy tried to make us pay him up. He said he had patented the idea of changing something on a CRT screen that actually went all the way up to the database and updated the database, just by making a change to the screen, which is, what the hell else are you going to do? And he said he had a patent on that. And he came by waving at us and said youre violating my patent. And we said, get lost, take us to court. It wasnt even a company, it was just a person who had filed a bunch of patents on every little nonsensical, I mean, just trivial stuff that we do all the time and have been doing for years. Isnt Oracle your biggest competitor across the board? About 9.9 percent of our sales situations, we are competing against Oracle. And theyre our largest [competitor]. Next Page: Weighing in on Oracle.