Let's look at what's going on in the enterprise applications software markets globally. In 2001 we have experienced dramatic compression in the enterprise applications software market. If you look at Department of Commerce data from the United States, the average private investment in software in the last thirty years averaged 19 percent per year; in 2001 it was 3 percent. So we are seeing a compression in the information technology industry unprecedented in the history of the industry. It looks like this compression right now is continuing. Those of you who have been tracking Q1 pre-announcements, it looks like quite honestly this appears to have been possibly the worst quarter in the history of the enterprise applications software business. Expectations were already set quite low and then they missed -- and missed big. You get to the third tier -- of which there has been a whole string of announcements. It's pretty interesting out there. So what happens in these compressions? What we see in these compressions is a shakeout of second and third tier players. Last year, I think we saw something on the order of 400 applications software companies close their doors. We saw something on the order of 700 software companies issue warnings and earnings shortfalls last year and this is continuing. Now if you look at the competitive dynamics of software markets -- the way that these things work out in market, after market, after market in an expansive state, the market leader will generate or accumulate about 50 percent share, number two will get about 15 percent share, number three will get about 10 percent and after that it just fractionalises. The exception to this is the operating system market -- the only exception we can find. In 1980 IBM had 83 percent of the operating system market globally. And they don't anymore. Somebody else has it, but it's a similar percentage. Now if we look at the HR market, Peoplesoft has about 50 percent of the human resources market. Who's number two? Who cares, right? I mean, it almost doesn't matter. In the ERP market SAP has about 50 percent share of the leaders. Number two? I'm not sure who the number two would be. Peoplesoft? Oracle? Somebody? I'm not sure. Number three? Who's number four? Number five? Really doesn't matter, right? So in market after market after market, this is what you see. Our strategy has been since 1993 to establish clear market leadership position in every market we are in. Market leadership implied about a 50 percent share. The purpose was, and the reason we wanted to do this, was that so when the market turned we could be in a position to continue to generate cash, continue to generate profit. This is the other side, this is the corollary of this dynamic. When the market turns it's only the market leader that can continue to generate cash, continue to generate profit, everybody else kind of gets shaken out. The shakeout is continuing. We see continued market contraction. We see continued earnings share falls. Continued CRM reorganisations -- Oracle just did a reorg, E.piphany just did a reorg, SAP does one once a year. On Siebel's market position
If you wonder why everybody in the ERP market is trying to move into the CRM market take a look at this chart. You guys are looking at a market that is about to become the largest segment of enterprise application software -- and in this market, Siebel Systems has established a leadership position in virtually every market in which we operate. We are the world's leading provider of CRM systems, we are the world's largest provider of ERM systems. In sales automation -- of the top five vendors, we have 80 percent share globally. We are the world's leading provider of marketing automation systems with 60 percent share. We have about 60 percent of the marketing automation marketing. The number two provider would be E.pihpany. I don't even know who the number three provider is. We are by far, by far the worlds' leading provider of call centre systems. Number two provider would be Dantic, number three provider would be Clarify. We are the world's leading provider of field service systems. I'm not certain who the number two provider would be. On the coming shakeout
The big shakeout coming into the CRM market going forward: Siebel is the leading provider in the space -- and then there is a big fight going on for who is going to be number two. All the e-CRM guys have been shaken out... In December 2000, all the analysts would have reported these were the up and coming CRM companies, these were the future of CRM. Well the future was not as bright as everybody thought. Our primary focus in 2002 is directed towards dramatically lowering the costs of enterprise application integration for our customers. On Universal Application Network Architecture
This is a pretty big industry event. Broad based, virtually universal, industry support for this the UANA... This technology will be available in the summer of 2002. Over 200 business processes, a comprehensive common object model, it incorporates ERP, supply chain, HR, CRN and will be available in the summer in eight vertical market manifestations -- for the automotive industry, public sector, financial services, telecommunications, insurance... this is a very, very exciting development. It addresses the most significant information technology problem that our customers are facing today. We have not proposed a trivial solution here. We've not said, "Gee, all you have to do is buy your ERP and CRM stuff from us and all your problems will be over." That's just not true. It addresses the real-world complexity of application integration... and offers an attractive architecture based upo industry standards, supported by virtually every global leader in this space. It is still difficult, but not beyond but not beyond the realms of what we call "non-trivial" in software engineering terms. On the Universal Architecture Server
XSLT is the emergent standard that we've all agreed upon to represent business transforms. Now, the significance of this on the industry side is that virtually every leading provider of this Explanation Transportation Technology -- IBM, MQ, Tibco, Vitria, Seebeyond Web Methods -- all agreeing that they will accept WSFL, as the input to their business process control, they will accept XML as the input to the Common Object model, and we will all accept XSLT as the input to our transformation engine... to build a very, very large library of business processes that work together because they're in WSFL. On accounting practices in tech companies
There have been a number of accounting excesses that go back many years in the enterprise applications software space. They are being tightened up. In the enterprise applications space there are companies with shell corporations with one employee... the effect is to dramatically inflate their revenue, inflate their earnings by 100 percent. There is one of those out there in the top four companies... there has been some of that going on, some of it coming out of Europe. On Microsoft and mid-market pricing
(Microsoft) is a big customer and major distributor of Siebel products to the mid-market. Siebel has no plans to change its mid-market pricing change on pricing for the mid-market.
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