CEO Hire May Prove Too Little, Too Late for Siebel

By John Pallatto  |  Posted 2004-05-04

CEO Hire May Prove Too Little, Too Late for Siebel

It was a wise decision for Tom Siebel to give up the post of CEO of Siebel Systems Inc. in favor of a newly hired outsider. But the move comes none too soon.

This is a decision Siebel should have made at least two years ago as the company struggled to deal with the post-2000 IT recession, during a time when enterprises jammed the brakes on new technology investments.

There comes a time when a corporate founder and technological visionary such as Siebel cant carry a company to the next level–especially when economic conditions have changed the rules of the game.

Click here to read the details about former IBM exec Michael Lawries hiring as Siebels CEO.

In the late 90s, as companies were expanding rapidly, they had capital budgets for new software that promised to provide productivity gains, such as customer relationship management (CRM), knowledge management, business intelligence and database mining. But sometimes these new installations didnt deliver results as soon as their customers wanted. Or, as happened all too often, the implementation was so fraught with problems that it failed altogether.

Another problem was that when the post-2000 downturn arrived, customers found that business restructuring changed their priorities, leaving them with neither the time nor the funds to make these expensive technology investments work. The new applications were scrapped when the organizations they were supposed to support were restructured out of existence.

Now, times have changed again. The economic recovery is continuing. Companies have more money to invest in IT technology. But they are being far more careful about which technologies they choose—and which companies they select to provide them.

That is where Siebels new CEO, Michael Lawrie, comes in. As a 26-year veteran of IBM, Lawrie brings the kind of experience Siebel needs to build a top-notch product development, sales and marketing organization.

Siebel is also dealing with several legal issues. After being fined by the Securities and Exchange Commission for violating financial disclosure rules, it is now fighting a shareholder lawsuit over alleged overstatement of its financial performance and expensing of employee stock options.

Click here to read more about a class-action shareholder lawsuit that Siebel Systems is fighting.

Lawries most recent post at IBM, as senior vice president and group executive for sales and distribution, put him in charge of a global operation that generated $80 billion in annual revenue.

The best possible postgraduate training course for an aspiring senior executive in the technology industry doesnt come from Stanford University, Harvard Business School or the Wharton School of Business. It comes from IBM. The company has provided chief executives for a host of companies throughout the industry.

Next Page: Lawrie confronts major challenges at Siebel.

Lawries Turnaround Tasks

But Lawrie has his work cut out for him. While the company returned to profitability at the end of 2003, its total revenues still have dropped year-over-year for 11 straight quarters.

Demand for Siebels on-site installation of its enterprise CRM applications developed over the past decade has declined as companies look for less expensive alternatives that dont require huge upfront investments for installation, development and training.

Growth in the future will come in the area of hosted CRM products sold by application service providers (ASPs). Siebel knows this and has responded with its own CRM OnDemand service, built in part with technology acquired from its recent acquisition and assimilation of UpShot Corp. Another area that is going to continue to grow is sales and business analytics, which Siebel is urgently building up.

Click here to read about Siebels strategy to concentrate on hosted CRM applications.

But Siebel faces intense competition in these areas from Oracle Corp.,, PeopleSoft Inc. and a swarm of others. Its not going to be easy for Siebel to grow fast enough to fend them off.

Lawrie is going to have to move quickly and use his industry connections and management expertise to direct growth toward the hosted CRM and analytics sweet spots.

He knows hell have to overcome intense resistance to long product-installation and return-on-investment cycles. Companies these days are more likely to expect to work productively with their new software in a matter of a few weeks, or two to three months at most.

"We also know what is expected of software companies and applications software companies is shifting," Lawrie said this week while discussing the challenges Siebel Systems faces. "Customers are demanding more value, demanding more expertise and demanding more return on investment ... in a shorter period of time."

Siebels task, Lawrie said, is to stay focused on delivering value quickly so it can "separate from the pack" of competitors and be a part of a new generation of leadership that emerges in the technology industry.

With Lawries hiring, Siebel has found an executive who has the best chance of anyone to lead the company into a new period of growth. But in the current market environment, there is no guarantee that even the best available manager in the industry can keep the competition at bay.

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