Epiphany released their latest results last week. Once again they lost money. Epiphany has yet to make a single penny. In fact Epiphany has lost more than $3.5 billion since it’s inception back in 1997. I have long been a major critic of the CRM industry. Why? Wrong rationale. Wrong solution. Wrong target. Wrong people. Case in point… Epiphany.
It is important to emphasize that Epiphany is in the business of helping companies to acquire, service and retain customers (as opposed to selling sophisticated machine tools). They’re suppose to be GOOD at selling. Epiphany develops the technologies that help companies generate revenue. The management team at Epiphany is a Who"s Who of American business including:
- Roger Siboni – Chairman of the Board – Epiphany. He was also Epiphany’s CEO. Before Epiphany he was COO of KPMG and is on the Advisory Board of the Walter Hass School of Business at UC Berkeley.
- Fred Anderson EVP and CFO of Apple Computer. Member board of directors Epiphany.
- Mohan Gyani, Former President and Chief Executive Officer, AT&T Wireless Mobility Group. Member board of directors, Epiphany.
- Paul M. Hazen, Chairman, Accel-KKR. Former chairman and CEO Wells Fargo. Member board of directors, Epiphany.
- Robert L. Joss, Dean of Graduate School of Business, Stanford University. Member board of directors, Epiphany.
- Doug Mackenzie, Partner, Kleiner Perkins Caufield & Byers. Harvard MBA and member board of directors, Epiphany.
So of course all this BEGS the question of why can’t Epiphany sell it’s own stuff? Why can’t Epiphany make a profit selling it’s own stuff? Remember Epiphany has burned through more than a billion dollars cash trying. And six years after going public the best they can muster is $20 million per quarter and massive losses. While the management team and board members continue to take home six figure salaries on top of the $100’s of millions they made off of the IPO. What’s going on here? Where is the adult supervision? Better yet where is the pride?
One possible explanation for this performance can be found with their management line-up. If you take a look at their management team you will notice that they have all sorts of titles and executives. But nobody who is responsible for sales. Literally. Look at the web page for yourself. You will will see no EVP Sales. No EVP Biz Dev. No sales manager. Nobody responsible for asking for the order!
Tomorrow, February 8, Epiphany will be presenting at the Merrill Lynch Computer Services and Software Conference. Their presentation will be at 3:15pm Pacific time and available here for webcast. I have two questions I’d like to pose:
1. How do you expect to sell stuff when you don’t have anybody responsible for selling stuff?
2. After burning through more than $1 billion in cash shouldn’t a company selling revenue technology be selling more than $20 million per quarter? Please explain.
I’ll let you know if I get an answer back. But I wouldn’t hold my breath.
Disclosure. I have an ax to grind with the folks at Epiphany. They cost me at least seven-figures back in 2000 when they acquired one of my clients. What started out as a $40 per share transaction ended up at $4. But hey, whats a few million dollars between friends? Grrrrrrrrrrrr.
UPDATE 09.12.05 I’ve been watching CNBC’s coverage regarding Oracle’s acquisition of
Siebel. Almost all the analysts are cautioning that Oracle will be
sidelined while they digest Siebel. Marc Benioff over at Salesforce.com
sent an email to employees claiming this is an opportunity to take
share from Oracle. If this was any other competitor I would agree with
Benioff, but in this case, based upon how quickly and efficiently
Ellison integrated Peoplesoft, I predict that Larry and crew will
strip, lube and reassemble the remaining parts of Siebel faster than a
Marine grunt stripping and cleaning his M16 before heading into a
Faluja firefight. In fact, I wouldn’t doubt if Oracle started to
immediately heave a few broadsides at Saleforce.com. Look for Oracle to
destroy the low-end of the on-demand business model. And migrate the
pricing and offering upstream. More on Siebel, Oracle and E.piphany:
SIEBEL SOLD FOR SCRAP – GEORGE SHAHEEN FULLFILLS VSENTE PREDICTION IN RECORD TIME
GEORGE SHAHEEN EQUALS ROGER SIBONI: WHY SIEBEL WILL BE SOLD FOR SCRAP
EPIPHANY: POSTERCHILD FOR THE CRM INDUSTRY?
LARRY ELLISON, ORACLE, PEOPLESOFT AND A BRILLIANT MERGER
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Everything aside, your argument has a few factual flaws:
1) Epiphany indeed has a SVP of Sales – http://epiphany.com/about/management.html#ashok
2) Epiphany was profitable in Q4 2003 – so they have made a few pennies.
3) Epiphany has burnt through a few hundred million dollars NOT a billion dollars.
Its always good to make an argument with the facts straight – once objective information such as numbers is distorted, the arguments don’t seem as strong anymore.
Hi Navendu,
Thanks for your comment.
Ashok is responsible for Worldwide Field Operations – not SVP Sales. Please represent his role correctly. His responsibility includes sales along with many other activities. Ashok does not come from a sales background. And his performance supports my observation… there is nobody in charge of sales. You lost $406,000 in Q4 2003. On the billion dollar burn… you’re closer on a reported cash flow basis. Our $1 billion cash burn adds wasted dollars on R&D, SG&A, bad acquisitions etc. etc.
But you duck the basic question of why you guys at Epiphany can’t sell(?)
The market for CRM just isn’t what it used to be during the tech-boom years. Plus, the sales price of the CRM product is just a fraction of the customer’s potential cost. It’s the integration effort that really hits the bottom line.
The poor sales numbers in the CRM industry isn’t so much a vote of no confidence in the CRM products — many of them (including Epiphany) are fine. Rather, it’s about getting the right people involved to make the CRM product work with existing systems. IMHO, this is Epiphany’s catastrophic mistake: Their sales strategy relies too heavily on business/consulting partners to push the sales, instead of initiating sales efforts on their own.
Enterprise Software Customers are trying to keep their costs down, so it makes little sense to initiate a new project with a consulting team. Such projects often exceed budgets and expected timelines — which used to be an acceptable write-off for Fortune 500 companies way back when, but that just isn’t acceptable these days. When high hourly rates are involved, consultants aren’t exactly motivated to get the job done quickly or on time. Customers know this, which is why they’re hesitant about investing in CRM.
1. CRM is not a sales pipeline software. It is Customer Relationship Management. You can’t use it if you don’t already have customers.
2. Like most automation software, you only get leverage when you deal with a lot of customers. CRM is such a big ticket item (in view of the costs of integrating to existing client systems – SAP, etc) that they have to focus more on ERP-like sales where a lot of people-to-people schmoozing goes on.
3. Perhaps the size of the pie is too small. What is their market share?
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