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No. of Recommendations: 7

I appreciate your comments regarding my report on Siebel Systems. You have been following the company for a very long time, so it is great to know that you still found it to be of high quality and insightful. To answer your question, I really do think the company is, or is pretty close to becoming the standard. I just hedged my bet a little bit in the report because I did no want to be too overbearing. The major risk in my opinion is execution risk, and when a company's major risk is execution risk, it means that in my mind it is their market to lose. Everyone else is catching up. Based on the strong management of the company, aggressive sales, technology, key partnerships and acquisitions, I believe it is their market to lose. When everyone else is catching up and its your market to lose, chances are pretty great that you are the standard, in my opinion.

Regarding the posts on disruptive technology, I still stick to my position, but I am not sure I disagree with you, I may just be perceiving the market differently. That dos not make me wrong, however. You mentioned switching costs. Moore is weak on switching costs, so a list provided by Michael Porter is below:

Cost of modifying products to match the suppliers products;
Costs of testing or certifying a new supplier's product to insure substitutability;
Investments in retraining employees;
Investments required in new ancillary equipment that is necessary to use a new supplier's
Products (tools, test equipment, etc.);
Cost of establishing new logistical arrangements;
Engineering or R&D costs;
Costs in modifying interrelated stages of production or related aspects of the business;
Psychic costs of severing a relationship.

The one that few people consider is the psychic cost of severing a relationship. This exists even in commodity-type markets as well.

In the case of hydraulic equipment (from the book Innovator's Dilemma), there were several companies that moved on this when it was truly disruptive. Meanwhile other companies in the same industry (construction equipment) but with different product lines (trucks) embraced the technology at different points along the technology's curve (trajectory). Some of them likely entered toward the end of its disruptive phase and still others later on. I don't view any of those companies as the disruptive plays.

I view the same thing in the storage market with EMC and NTAP. EMC was involved in enterprise networks, but NAS devices are disruptive. They poo-pooed it. NTAP grabbed share. EMC filled in the product line by acquiring DG, and also made a play in the NAS market with their own Celerra product. I still think NAS is disruptive, but EMC is not the play there, NTAP is. Both SANs and NAS' will co-exist, and both companies are solid investments, but I view EMC's move into the market as a way to fill in their product line and grab a secondary piece of the share. The improvements they make are likely to be sustaining to the overall NAS market. And, their trying to sell a total-end to-end solution (sound familiar).

So, here are my insights probably not mentioned in the book (I don't recall them being mentioned):

1. The Internet world moves much faster than the real world, hence if you are six months late to the party, it's like being three years late, and the boat left without you.

2. Each technology has a trajectory, but each company also has it's own trajectory along the product trajectory.

3. The incumbents in an industry may adopt the technology while it is still disruptive, but since they are late, their strength is through their installed base, but only those customers that the true disruptive play has not already reached (e.g., if there is overlap between SEBL and ORCL customers, if they already bought from SEBL, they will stay there until a killer app. unseats its position).

Oracle's CRM applications fill in their product line by adding functionality and convenience, but it's SEBL's game to blow as they were the true disruptive play here (I also view Vantive and Clarify as also rans especially b/c they were acquired by bigger players).

Just my point of view. Thanks again about your thoughts on the SEBL report.

The SEBL report will be made free to folks, so check the Research page later in the day.


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