At the same time, economic circumstances have compelled the San Mateo, Calif.-based company to reduce the number of employees dedicated to managing partnerships.
Analysts say the drop in the number of Siebel alliances indicates that the company has lost considerable influence in the software business, where the size of a company's partner ecosystem is equal to its status, and where effective partnerships are an important part of a company's ability to sell products.
"It's not a good sign," said Laurie Orlov, an analyst at Forrester Research. "One of the things companies get out of technology partnerships is more feet on the street promoting their products. The net effect (of fewer partnerships) is less market reach."
Over the past two years, the number of partners that promote, support and specialize in Siebel products has shrunk from roughly 700 to about 360, according to the company. A series of layoffs and restructuring moves, meanwhile, has decreased the company's total staff by nearly one-third, or 2,400 people, since the end of 2001.
, announced last month, chipped away further at its alliance-management team, a source familiar with the company said. A Siebel executive refused to confirm the size of the team or how much it has been diminished but said that despite cuts to the program, partnerships remain a high priority at Siebel.
"Our commitment to alliances is, was and shall continue to be very, very strong," said David Peranich, vice president and general manager of alliances at Siebel.
By contrast, Siebel competitor SAP has seen its number of partnerships grow in recent years and now maintains about 1,500 alliances, an SAP representative said. Microsoft, which relies on a network of regional resellers to distribute its line of business applications, has about 6,000 partners globally and is striving to grow that figure.
In addition to creating buzz and driving sales, partnerships also serve information technology consumers by encouraging compatibility among products and support of essential services. Partnerships can also help business application companies like Siebel, SAP and PeopleSoft stay current on the latest hardware and software infrastructure developments.
For instance,its complex set of applications, which are designed to streamline corporate sales, marketing and call center activities and thereby help businesses save money and boost customer loyalty. The new set of programs, which Siebel plans to release in a year or so, is supposed to incorporate new software-development technology from Microsoft and IBM, rendering the applications easier to customize and more compatible with other business systems. Analysts say this cooperation-intensive effort is critical to Siebel's future.
Speculation was flying in recent weeks, however, that as part of its latest reorganization, Siebel had slashed the number of employees involved in managing its relationship with Microsoft. The two companies hadlast year as a "historic strategic alliance to transform enterprise computing."
Siebel's Peranich denied the rumor, saying that more than 100 Siebel people are involved in some aspect of the Microsoft partnership. A Microsoft representative initially said the company's partnership with Siebel seemed on target despite the fact that Siebel had laid off some of its employees working on the alliance. The representative later claimed to have made a mistake about the layoffs and said Siebel had merely shifted one person off the team and had already replaced that person with someone else.
Battening down the hatches
Pruning back staff dedicated to managing partnerships may be an economically sensible thing for Siebel, despite the potential harm, analysts said.
"It's a reflection of market conditions and of Siebel's condition," said Jim Shepherd, an analyst at AMR Research. "Alliances are something you're more inclined to do when times are good."
And Siebel has certainly seen better times. During the late '90s, the company skyrocketed to the top of a $3 billion software market for customer relationship management (CRM) products, becoming one of the fastest-growing software companies in history. In 2000, Siebel grew 121 percent, surpassing the $1 billion revenue mark after just seven years in business. The company exceeded $2 billion in revenue in 2001.
Then last year, like so many of its software peers, Siebel saw its revenue plunge as many companies quit buying new business systems. Siebel's profits turned to losses, and investors sent the company's stock tumbling. Wall Street analysts criticized the company, which counts sales forecasting among the strengths of its software, for failing to react quickly enough to the drop in demand.
Though Siebel, layoffs have put a squeeze on its sales and marketing operation. Meanwhile, competition from SAP and Microsoft is growing, threatening Siebel's leadership position. In addition, the merging of rivals PeopleSoft and J.D. Edwards along with is leaving some wondering about Siebel's fate in a rapidly shifting industry. "The specter of consolidation will loom over Siebel," Soundview Technology securities analyst Peter Coleman said.
Siebel isn't alone in attacking heavily staffed alliance programs after putting costs and expenses under the microscope. PeopleSoft discarded some of its service and consulting partners last year in order to save money and management resources, a PeopleSoft representative said. Onyx Software has adjusted its partnership program, focusing on big hitters like IBM and Deloitte Consulting and moving away from small regional resellers, a representative said. And many companies who were former partners of companies like Siebel, PeopleSoft and Onyx are simply no longer around, victims of the dot-com crash.
Peranich stressed, too, that at Siebel's current revenue levels, the company has proportionally more resources invested in alliances than it did about three years ago at the same revenue level. The new alliance structure is more streamlined and will make dealing with Siebel easier for partners and customers, he added.
Still, losing popularity in a shrinking market is troubling.
"At one time, Siebel was the fair-headed child of the software industry," said Bruce Daley, editor of the Siebel Observer. "They were it, and everyone wanted to be a partner. Siebel is not in the same position today."