Here is an e-mail I received from Siebel’s Bruce Cleveland recently. Look for an interview with him in the August 2005 issues of Customer Interaction Solutions Magazine (subscribe to Customer Interaction Solutions) in my High Priority column. As you will read in the next few weeks in the magazine, I really think Bruce Cleveland is one of the best things that ever happened to Seibel Systems. He has the energy and vision they need at Seibel and is willing to talk to the press in an honest and straightforward fashion that is quite refreshing. He has been promoted recently which is great news for Siebel shareholders. See the bottom of the letter for details.

------------------------------

As you know, the hosted CRM market has been growing at a rapid pace, and we continue to see more and more companies, large and small, adopting Siebel CRM OnDemand to improve their customer-facing processes. Results for Q2 show accelerating momentum for Siebel CRM OnDemand, and I’d like to share with you some key accomplishments:

--Achieved \$20.0M OnDemand total contract value (TCV) versus a total of \$10.6M in Q1

--Grew OnDemand TCV by more than 249% year-over-year

--Grew user count to a total of approximately 40,000 OnDemand users

--Achieved a 58% overall win ratio vs. Salesforce.com vs. 56% in Q1-2005 and 5% in Q1-2004

--Delivered our eighth Release of OnDemand in little more than 18 months, providing customers with more customization and analytical functionality

--Won endorsement by key industry analyst firms (Forrester, Gartner, Nucleus and Yankee) for meeting and/or exceeding the functionality of Salesforce.com

I am extremely excited about the progress we’ve made and can honestly say that Siebel CRM OnDemand is now the best solution available in the hosted CRM market.

But beyond the numbers, there is a qualitative shift worth mentioning. Companies are recognizing the value in Siebel Systems’ strategic approach – that it’s all about solving specific business problems and delivering positive business impact. A successful CRM project requires great technology but technology alone is insufficient. Senior executives want to see measurable business value from their CRM solutions-to grow their existing customer base, to retain their best and most profitable customers, to target and acquire new customers and to provide unmatched customer service. A hosted, on-premise, or hybrid approach to CRM is simply the delivery model to reach these desired business outcomes and not the root cause of success. As such, we have seen large enterprises select our hosted CRM solutions, while we’ve seen mid-sized companies purchase our on-premise software.

--

Specifically, in a period when a high profile hosted CRM competitor had some very public problems with its largest deployment, our customers had high praise for our solutions.

Pulte Homes, when fully operational, will be one of the largest hosted CRM deployments in the industry-Siebel primarily won this business because it was able to prove deep domain expertise. As the nation’s largest home builder by revenue and No. 181 on the FORTUNE 500, “Pulte Homes required a scalable, enterprise-class CRM solution that could help centralize our sales and marketing processes,” said Jerry Batt, CIO, Pulte Homes. “After evaluating a range of offerings, we selected Siebel CRM OnDemand based on Siebel Systems’ thought leadership in front-office applications and the company’s domain expertise in working with large companies to solve complex business problems. We also valued the breadth and depth of Siebel’s world-class toolset, its impressive R&D infrastructure, and its strong built-in analytics capabilities.”

--

Finally, industry analysts have voiced their recognition of the value in Siebel Systems’ approach to improving customer-facing processes. While Siebel has long been noted for its superior on-premise CRM solutions, recently industry analysts are recognizing Siebel Systems for delivering the greatest business impact through its hosted CRM solutions. For example, Siebel CRM OnDemand received a higher overall customer satisfaction rating than Salesforce.com for its hosted CRM solution in Nucleus Research's recent ROI Scorecard. Additionally, In a March 2005 Forrester Wave report by Liz Herbert, Forrester recognized Siebel CRM OnDemand for best strategy, strong customization and integration tools, and deep industry-specific offerings.

In closing, I should mention that in April I was named Senior Vice President, Products-overseeing all product areas of the company while still continuing in my role leading OnDemand and SMB. In my new role, I look forward to continuing our communications and to expanding it to include broader topics.

I hope to see you at Siebel CustomerWorld, to be held October 16 – 19, 2005 at the Boston Convention & Exhibition Center. In the meantime, if you're interested in talking with me, please reply to this e-mail. If, on the other hand, you would like to be removed from this list, just let me know at any time.

Best Regards,

Bruce