Siebel Eyes Growth in Small Business Market

Rudin's boss, Bruce Cleveland, said the company initially tried to sell OnDemand via telemarketing. But it didn't work; and Cleveland convinced his boss, Mike Lawrie, that the company needed to change gears. Cleveland instituted a realistic incentive plan to encourage sales reps throughout the company to sell products to smaller customers as well as to the large customers they are used to working with. "It's hard to compete when you're not even there," Cleveland quipped when asked about OnDemand's admittedly slow start.

Like many large software companies, Siebel does most of its business via a large direct sales force, but it also sells through the distribution channel, and those relationships have not always been smooth. Put simply, Siebel didn't play well with others. Among other sins, the company often stepped on its sales partners, letting them do the hard work of making an initial sale and then grabbing all future revenue opportunities from the miffed partner.

Whether the company has really learned how to avoid "channel conflict" remains to be seen, but at Tuesday's press conference, Siebel trotted out a series of partners whom it says will be key to the SMB efforts. It calls its new channel strategy "sell with" as opposed to "sell through," implying a much closer collaboration between Siebel and its partners, and laid out a very detailed program to manage the partnerships. Moreover, Siebel's channel efforts are getting a significant boost from IBM, which has added OnDemand to its portfolio of offerings specifically priced and designed for SMBs.

Making hay in the SMB market isn't going to be easy. Salesforce.com, for one, has set its sights squarely on the customers Siebel intends to grab, and has had significant early success. Indeed, a bevy of enthusiastic Salesforce marketers stood outside Siebel's press conference, handing out scarves and Christmas cards making fun of Siebel. And just two blocks away at San Francisco's Moscone Center, where Oracle(ORCL) is hosting 25,000 people at its annual user convention, Co-President Charles Phillips said his company now has the products -- and the will -- to dominate the SMB market.

On Tuesday, Lawrie refused to give earnings targets for the SMB effort, and, unlike his predecessor Tom Siebel, he was careful not to sound too boastful. "Actions speak louder than words," he said. Lawrie's got a couple of quarters to prove it.

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