The Siebel Observer
March 30, 2004

Does Market Share Matter?

The Art of Networking



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Does Market Share Matter?

A major war of words promises to erupt between Siebel Systems and SAP over which enterprise software company leads the market for CRM software. Combatants already view this as a bitter fight to the finish. To the innocent or not-so-innocent bystander this war (like many wars) has obscure origins, inspires heated passions, and has resulted in waste of resources.

The immediate cause of the conflict is a series of independent reports that seem to indicate SAP may strip Siebel Systems of its title as the CRM market share leader. According to AMR, Siebel System's CRM revenue in 2003 was $1.3 billion while SAP's was $1.25 billion and growing. Another report from the Swiss bank, UBS, showed SAP with a 42% market share in 2003 already surpassing Siebel Systems' 39% share. Since the two reports contradict each other, neither is definitive and they just add fuel to the fire.

Does market share matter? In theory, yes it does. Among the other important ideas author Geoffrey Moore has given the industry is the notion that the market share leader in technology ends up with 50% - 60% market share while the second company in a market ends up with 7% - 15% because technology buyers have a herd mentality. Tom Siebel often quotes Mr. Moore in a presentation he gives when he describes the markets Siebel Systems dominates. The Siebel Observer was founded on the premise that Siebel Systems is the market leader in CRM.

What bystanders overlook is that market share is two words - market and share. For the share to be consistent the market must be same. The problem with both the AMR and the UBS report is that there is no longer a single CRM market just as there is no longer a market for standalone spreadsheets. The CRM market has splintered into a series of vertically focused markets in which Customer Relationship Management is a part of a larger business process. With its huge installed base of 21,600 customers and more than 69,700 installations, SAP clearly dominates the manufacturing and distribution industry segments. Clearly SAP is having a lot of success selling those particular industry verticals CRM. Siebel Systems has seen some success selling to SAP's installed base as well, but its greatest success is in industries that do not make products: telecommunications, financial services, travel and leisure, high tech consulting and software. SAP is share leader for CRM in the markets it already dominates and Siebel Systems is the leader in the markets in which SAP is not a good fit.


The Art of Networking

I have been accused of building my business on networking. My responsibilities as editor of The Siebel Observer, The PeopleSoft Observer and The SAP Observer give me many opportunities to make professional contacts, an essential skill of any successful journalist. Everyone can build a strong network of business contacts around them if they make the effort. Despite recent advances in technology, network building is still as much an art as a science.

Trust
Human beings have evolved into highly social animals. Not all species share this trait. As familiar examples, bears and tigers lead happy and satisfying lives almost entirely in their own company. As social animals, people are more like bees or ants in creating complex social systems with specialized responsibilities. The mortar that holds any social system together is trust - the fact that two people can have confidence in each other's character, ability and/or knowledge. Your network is a social system. Its foundation is another's ability to trust you. You can only be trustworthy when you are true to your nature. You have to be honest with yourself about what other people can trust you with and honest with them when you can not deliver. By the same token you have to be able to trust the contacts in your network. That does not mean you have to trust everyone in your network with your life, much less your wallet. Also, there are going to be people that you do not want to have as part of your network, either because you can't trust them or they can't trust you. Technology doesn't alter this trait of human nature,

Timing
The wrong time to build a network is when you need it most. Trust is almost never instant. It has to be built over time through a series of small interactions that build mutual confidence. The most dangerous time to trust anyone is when they are desperate. If you wait until you need someone to establish a relationship, it is usually too late. On the flip side, the best time to establish a relationship with someone is when they need you. One very successful head of a system integration firm calls up CIOs right after he hears they have been let go. He invites them to play a round of golf and introduces them to a headhunter to help them find their next job. When they do, they almost invariably do business with his firm.

Breadth
Some of the most valuable contacts in your network will be with the very people who are most unlike you. The classic example in the movies is the man who sweeps his date into the crowded nightclub and immediately gets a table at the front because he knows the maitre d' personally. In sales, experienced reps know the importance of getting the support of administrative assistants, who can often be of more help than their bosses. If you have a high level position, having a number of contacts at other levels can be extremely useful.

Occasions
A useful way to create and expand networks is to create occasions. Every winter I sponsor a retreat called The Enterprise Software Summit in Sundance, Utah. The event is an opportunity for people I meet throughout the year to get to know each other in an environment that encourages business relationships. Now in its fifth year, the Summit has become an occasion akin to St. Patrick's Day in some people's calendar. You can do the same thing by planning a dinner or a luncheon and giving your professional contacts a chance to meet one another and expand their network.



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