Siebel Case Study:
Pricing Strategies in Software
Tania T. Goldszmidt
VP, WW Operations, Sales
Siebel Systems, Inc.
October 18, 2004
High Tech: Software License Pricing Drivers
Pricing primarily has to be:



Scalable
Flexible
Enforceable
Pricing then has to:

Reflect Value (Communications, perspectives,
end to end solutions)

Incorporate feedback from Analysis

Include services bundling
Reflect software industry trends:
Multi-tier
Order
Management
Key Solution Components
• Intelligent Product Recommendations

Driving recurring revenue streams:
subscription, maintenance
• Complex Pricing and Configuration

Utility based: How many times system is
accessed or used vs number of users
• Entitlement Verification and Tracking
Serve different segments:

Enterprise & Small and Medium Businesses

On Premise License & On Demand
Subscriptions

Support Services & Custom Solutions
Development
• Collaborative Order Management
• Streamlined Quote to Contract Process
• Simplified Self-service Purchasing
Pricing Governance: People, Process, and Technology
Process
Methods
People & Practices
Technology
= Optimal Pricing & Ease of
doing business
A Customer-Centric Pricing Process
Introduce new products and price lists,
and update and maintain pricing data.
Price
Administration
Deploy price and discount information to
support price negotiations and
transactions in a cost effective manner.
Price
Execution
Price
Planning
Customer
Price
Enforcement
Determine prices based on customers’
sensitivity to prices from win/loss
history and discount analysis
Enforce contractual pricing policies,
discount authorities through approval
processing and routing
Design compensation for pricing
incentives and discount penalties
Phase 1: Focusing on Execution and Administration
Objective: Develop base infrastructure to drive operational efficiencies
 Redesign and Deploy New Lead-Quote-Order Management System
 Develop Analytics Datamart
 Create a predictable fulfillment model
 Help build, validate & deploy best in class product configurations
 Create low touch, highly integrated applications that increase employee
productivity rates
 Ensure effective communication & handoffs between different business units
involved in creation and management of price lists, deal approvals and orders
New Integrated Order Management Infrastructure
Order Lifecycle Management
Mobile
Quotes
Contracts
Customer Assets
Call Center
Retail POS
Orders
Pricing
Management
Product & Catalog
Management
Product
Product
Selection Configuration
Deploy
Catalogs
Define
Offerings
Pricing
Analytics
Price
Price
Administration Execution
Price
Planning
Price
Enforcement
Web
Customer
Surveys
Industry
Analysis
Contract
Systems
Customer Information
Account
Partners
Opportunity
Contact
Billing
Systems
Results:
 Operational Efficiencies
 Lower order costs by reducing quote and order errors by 35%
 Reduce order cycle time up to 37%
 Reduce customer inquiries & collections by 50-80%
 Created a consistent repeatable set of business processes
 Deployed a low touch, fully integrated set of applications
 Increased accuracy & completeness of order data by 90%
 Improved visibility into customer asset base & deployments.
Identification of up-sell & cross sell opportunities
 Increase orders processed per employee by 15%
 Manage order process with 47% less staff
Phase 2: Focus on Pricing Enforcement and Analysis
Objective: Design Organizational Structures and Pricing Metrics
 Drive Top Management attention to pricing and discounting
 Increase visibility across deals, customers, products, markets
 Develop feedback mechanisms for better pricing planning
 Align incentives to drive improved pricing performance
 Facilitate negotiation process and improve customer relations
Pricing Enforcement Challenges
3. Wide Variability in Discounting
•
Large Discounts on Small Deals
Wide Discount range on similar sized deals
80
 Discount from list in %
•
70
60
50
40
30
20
10
0
100
1,000
 Deal size in Dollars
10,000
100,000
1,000,000
New Deal Approval Process
Alignment across Business Units
CEO
The Siebel Pricing
Committee will request
CEO Approval
Legal
Contract
Terms
Products/
Engineering
Siebel Global
Services
Product and
Development
Commitments
Services
Terms
Siebel
Technical
Services
Siebel
Finance
Maintenance
Terms
Sales
President
Revenue
Recognition
Business
Terms
Siebel
Pricing
Committee
Discount
and other
Terms
- Review validated quotes
Sales Operations
Any Pricing + Special Business Terms on All
Deals to be sent to Sales-Deal Approvals
If no additional approvals are required, SalesDeal Approvals will approve the transaction
VP
RM
DM
- Review business terms
- Review discount approval authority
- Review existing contract terms
- Review potential revenue recognition issues
Sales Team
Recommended Pricing Envelopes
Discount
100%
90%
Consistent Pricing Practices
• Provides discount guidelines
by Industry, deal size, region
• Aligned with Sales
Compensation
30%
• Revised Quarterly
• Effectively used to set
customer expectations
•Opty #10
• Opty #9
60%
50%
•Comp Plan Matrix
• Opty #11
70%
• Based on historical
transactions analysis
•Discount Ranges
• Opty #12
80%
40%
20%
10%
0%
$0
Opty #6
• • Opty #8
• Opty #5• Opty #7
• Opty #4
• Opty #3
•Opty #2
• Opty #1
$100K $500K $1.0M $2.5M $5.0M $10M $15M
Deal Size
Results:
 Continuous drive toward more
consistent discounting
Deal Size vs Overall Discount for Q1'03 - Q3'04
practices
100,000,000
10,000,000
Net Deal Size
1,000,000
100,000
10,000
1,000
100
10
0%
10%
20%
30%
40%
50%
Discount
60%
70%
80%
90%
100%
Case Study: Packaging and Pricing for the SMB market
 Have Infrastructure
 Have Discipline
 Have Analytics
….discovered deep discounts and customer satisfaction issues
in Mid Market offering
Phase 3: Address Value Proposition in Key Segments
 Need to understand and address different customer segments
 Need to understand customer key buying factors and provide
appropriate deployment and pricing options
 Need to understand value and rethink how to package your
products
 Do not forget about the complete solution: service bundles
Understanding the Customer’s key buying factors
Feedback from MME Customer Interviews--10/03-6/04
 “Siebel is too expensive for SMBs”
 MME was 2X cost competitors
 Siebel often tried to sell SMBs enterprise product at 4X cost of competitors
 SMBs pay enterprise prices for maintenance
 “Siebel does not understand SMB needs”
 MME strategy of “less functionality for smaller customers” was patronizing
 Siebel offered no vertical solutions for the SMB
 Siebel assumed SMB sales cycle was simpler an attempted to close business over
phone
 “Siebel makes SMBs “compete” with enterprises for attention”
 No separate service and support channel
 No separate sales org
 “Siebel is too complex”
 SMB customers reported spending 4X-6X more on Siebel implementations than on
competitors1
 Product bundles forced customers to buy more CRM than they needed
1TCO
for MSB CRM Software, Gartner, Feb ‘04
Customer Sat Survey Supports Interview Findings
Q1 ’04 MME Customer Satisfaction Scores
Scalability of Product
.5
TAM Effectiveness
.7
End User Education
.7
Sales Org Effectiveness
.8
Technical Training Effectiveness
.8
Reseller and End User Education
.8
Software Reliability
1.2
Consulting Services Effectiveness
1.3
Ease of Doing Business
1.3
Ease of System Administration
1.3
Ongoing Tech Support Effectiveness
1.4
Product Effectiveness
1.7
Functionality Meets Your Business Needs
1.7
Ease of Integration With Other Vendors
1.8
Ease of Using Product on Day-To-Day Basis
1.8
Speed of Product
1.8
Documentation
1.8
Ease of Product Configuration
1.9
Product Meets expectations
2.0
Ease of Product Installation
2.0
Price Of Product At Time of Install
3.3
MME Customers Want More Value
 Gap between “Product Effectiveness” and “Product
Meets Expectations” reflect disatisfaction with “striped
down product’ strategy
 Customers frequently expressed concern regarding
price of software and installation
 Many SMB customers underestimated complexity of
install and attempted without an SI
Siebel Professional
SalesLogix
MSCRM
Onyx
Pivotal
SF.com
Good enough functionality
Light Features or features delivered through partnerships
Has yet to demonstrate functionality
Source: A Feature Comparison of CRM Suites for MSBS, Wendy Close, Gartner, August 8, 2004
Campaign Mgmt.
Content Mgmt.
CRM Analytics
Data Cleansing
Field Service
Customer Service
E-Commerce
Partner Management
Inside Sales
Field Sales
Analyze Competitors Offering and Capabilities
Siebel Delivers CRM for Everyone
CRM any way users prefer
CRM for any size Organization
 Hosted CRM
 Enterprises
 On premise CRM
 SMBs
 Hybrid Hosted/On Premise
 Workgroups
CRM for any industry
CRM for any type of user
 27 Industry Solutions
 Power User
 1000’s of business processes
 Casual Users
 Universal Application Network
 Mobile Users
Enabling companies to deliver seamless and superior customer experiences by
extending CRM to everyone in their organizations and partner ecosystems
Key Insights from Analysis
Depth in Focused Areas
Diversity Requires Flexibility
 Sophisticated requirements
 5 M SMBs have diverse needs
 SMB deployment is narrower in
scope than enterprise
 Solutions must grow with
business
 Usability drives ROI
Trusted Advice
Limited Room For Error
 Local presence
 Thin margins
 Domain Expertise
 Limited cash supply
 Track record for Success
CRM Professional Edition—Exactly What SMBs Need
Expanded Product
Flexible Packaging
 35 new or enhanced modules
 Create customer bundles
 Horizontal, FINS, CME, Life Sci.
and Consumer Goods products
 Purchase additional modules a
la carte as needs evolve
 80% improvement in task
completion
Premiere Partnerships
Affordable Pricing
 Leading SMB resellers in U.S.
 Horizontal-$995/user
 12 Point Certification Process
 Vertical-$1095/user
 CRM Domain Expertise
 $54K Implementation
 Pre-negotiated financing rates
Enabling companies to deliver seamless and superior customer experiences by
extending CRM to small and medium sized businesses and partner ecosystems
Flexible Packaging Allows SMBs to Create Custom
CRM Bundles
 Build the Application You Need
 Start with a Sales, Service, Marketing or
Call Center base
 Choose 6-8 additional modules at no
extra cost
Option 1
Customer Choice Customer Choice
Option 3
Option 4
Customer Choice Customer Choice
Option 5
 Solution Grows with Business
Option 2
Option 6
Customer Choice Customer Choice
 Purchase additional functionality a la
carte
 Select from over 50 modules
Base Application
Affordable Pricing Options Address SMB Purchasing
Preferences
 Single payment at time of purchase
$995 per user
Fixed Fee
Implementation
 Maintenance and support purchased separately
 $54K implementation
 Up to 200 users
 6 week implementation
 Access to Siebel’s pre-negotiated rates
Financing
 Loan durations range from 24-36 months
 Convenience of dealing with a single vendor
 Partnerships with premiere financing
companies
$100K Software and Implementation for 50 users
 $54K Fixed Priced Implementation
 Up to 200 Users
 Sales, Service, Call Center
 Vanilla configuration with some
allowance for customization
 Deployed in 6 Weeks
 Project Charter and requirements
definition
 Design and configuration
 Data Migration
 Testing
 User and Administration setup
Cost Scenarios
50 users
100 users
Software Cost
$50,000
$100,000
Fixed Price
Implementation
$54,000
$54,000
Total Cost
Cost Per User
$104,000 $154,000
$2,100
$1,540
Siebel 7.7 CRM Professional Edition Delivers Unique
Value That No Competitor Can Match
 Deep product functionality and usability drives adoption and reduces
costs associated with customization
 Packaging that offers flexibility and expandability to simplify deployment
and adoption and to grow with the business
 Competitive pricing with no hidden costs
 A partner network with the deepest CRM domain expertise to ensure
customers get what they want, when they need it, for the price they can
pay
 The solution that addresses evolving business needs through migration to
Enterprise and deployment in a hybrid hosted environment
Siebel Case Study:
Tania T. Goldszmidt
VP, WW Operations, Sales
Siebel Systems, Inc.
October 18, 2004