Siebel: The Megadeal Isn't Dead Yet

Is the customer-relationship-management megadeal dead, or has it just been in deep hibernation? Many CRM providers contend that market dynamics have permanently shifted to bite-sized upgrades and proven return on investment before significantly escalating the implementation. Market leader Siebel Systems Inc. tried to dispel that notion last week, revealing that it had installed more than 50,000 seats of its eBusiness applications at Hewlett-Packard and its partners since the computing vendor's merger with Compaq a little more than a year ago.

Siebel had 10,000 seats within Compaq before the merger and has since added between 16,000 and 20,000 seats for HP's sales-force, marketing, and call-center units, according to the companies. Siebel has also implemented 37,000 seats of its partner-relationship-management system at HP's resellers, the company says. That number will likely grow to more than 40,000 next year, says Mike Overly, VP of customer operations for HP's global operations.

HP declined to specify the cost of the implementation, but Overly says it's spending roughly the same amount for the enterprisewide Siebel implementation as it has spent on its back-office software implementation.

At large companies, such projects can easily run into the tens of millions of dollars. "From a customer-experience standpoint, it was absolutely imperative to move forward rapidly," Overly says. HP expects to gain a unified view of customers across all channels and drive operating efficiencies.

During the past year, HP shut down non-Siebel CRM software for sales, marketing, and call-center workers, Overly says. Some CRM software from PeopleSoft Inc. and SAP remains in areas such as consumer interaction.

Siebel says it can point to several multithousand-seat installations of its software at big companies, including IBM. IBM has 20,000 seats, and Siebel expects that to grow to more than 100,000 in the next year or two. The CRM vendor also recently signed a $10 million deal with an unnamed company.

Such activity is reinvigorating the debate surrounding the wisdom of megadeals versus smaller implementations. "It's absolutely possible to do an enterprisewide deal," says David Schmaier, executive VP at Siebel. "Conventional wisdom has swung from, 'Everyone is doing big deals' to 'No one is doing big deals.' The truth is somewhere in between."

The trend among companies to consolidate software, as HP is doing, may be the main factor driving these deals, says Kelly Spang Ferguson, an analyst with Current Analysis. Two weeks ago, Dial Systems Corp. said it's scrapping several diverse software packages, including Siebel's CRM software, for a $35 million SAP enterprise suite.

But Denis Pombriant, an analyst with the Aberdeen Group, says there's more to it. The recent deals might signal a looming recovery. "It's a great announcement for CRM in general and for Siebel and for HP," he says. "Megadeals have been in short supply, and the proximal cause is the recession. Given six months' distance, we may look back at this as an important milestone in the overall recovery."

Some of Siebel's competitors remain skeptical. "People are looking to move the base runners along, not swing for the fences," says Brad Wilson, VP of marketing for PeopleSoft. And the probability of failure with megadeals is high, says Jim Steele, president of worldwide operations for Salesforce.com Inc. "There are plenty of companies that regret that they now have all this software sitting on the shelf," he says.

HP isn't planning to be one of them. It expects its deployment to reduce operational costs, saving the company tens of millions of dollars.