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    Lawrie Proves No Match for Siebels Troubles

    Written by

    John Pallatto
    Published April 14, 2005
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      The sudden resignation Wednesday of Siebel Systems CEO Michael Lawrie is an object lesson for all veteran corporate managers who believe they can turn any company around.

      Lawrie arrived at Siebel last summer after building a sterling career at IBM, where he worked as a turnaround specialist at several divisions at that sprawling technology company.

      Siebel should have been one more successful assignment on Lawries resume. But Siebel, which virtually invented the CRM (customer relationship management) software sector in the 1990s, is a special case.

      The post 2000 IT technology recession hit Siebel hard, and the company resorted to staff cuts and restructuring to stem the flow of red ink. At the same time Siebel was facing more competition on the high end from diversified producers of enterprise resource planning software suites from Oracle and SAP that included CRM software. At they low end the company was dealing with competition from new lower-overhead hosted CRM application services offered by Salesforce.com and RightNow Technologies.

      Lawries boss was Tom Siebel, the founder of the company who had given up the CEO position with the idea of bringing in a professional manager who would get the struggling company back on track to consistent growth.

      And for the first couple of quarters on the job it looked like Lawrie was going to be as successful as he had been at his IBM posts. In January, Siebel reported fourth-quarter 2004 revenue of $392 million, ending 13 straight quarters of declining revenue.

      /zimages/5/28571.gifClick here to read the details about the resignation of Michael Lawrie and the appointment of George Shaheen as the new Siebel CEO.

      But just as quickly Siebel hit a wall. The company warned Wednesday that it was cutting its estimate for first-quarter revenue 13 percent from $345 million to $300 million. This would be the lowest sales tally in five years and exactly the sort of numbers Siebel didnt want to report.

      The shortfall was apparently far more than the company was willing to accept under the watch of its new turnaround specialist, so they agreed to part ways.

      Lawrie was given short shrift because of “very high expectations of Siebels board to drive revenue and maintain a substantial lead over SAP,” said Mary Wardley, a CRM industry analyst with IDC, in Framingham, Mass.

      In the conference call Wednesday in which the company discussed Lawries resignation and the reduced sales estimates, Siebel board members “focused very heavily on the operational performance as well as the value to the customer,” which was what Lawrie was supposed to be taking care of, Wardley said.

      /zimages/5/28571.gifClick here to read eWEEKs recent interview with Michael Lawrie.

      “My sense is that the goals of the board were very aggressive, and he didnt hit them,” she said. It wasnt a surprise to Wardley that first-quarter sales figures were down because early-year results are always lower than the later quarters, Wardley indicated. In the conference call, “Tom Siebel said that the previous quarters were not as high as they wanted them,” she said, which didnt help Lawries cause.

      Now its the turn of 10-year Siebel board member George Shaheen to see if he can get the company on a consistent growth path. Shaheen is the former head of Anderson Consulting, which has since been reorganized as Accenture. He is also remembered as the manager who was at the helm of dot-com grocery delivery service Webvan in the midst of its 2001 collapse.

      Next Page: How will Shaheen respond?

      Page 2

      Shaheen will likely respond with “some very aggressive internal behavior to manage costs and achieve the kind of positive growth that the board expected Lawrie to generate,” Wardley said.

      “One of the main points in Georges favor is that he excels at meeting and exceeding financial expectations,” Wardley said, his experience at Webvan notwithstanding. Lawrie also had that reputation before he arrived at Siebel. He might have still achieved those goals if the Siebel board felt it could afford to give him more time.

      The latest management shakeup raises the question yet again whether Siebel can long survive as an independent company and if it is therefore ripe for a takeover.

      /zimages/5/28571.gifClick here to read why customers had been hopeful that Siebel had finally turned the corner toward steady growth.

      Siebel still retains its core identity as a best-of-breed CRM technology company selling licensed software that has long sales and implementation cycles. Trying to build a hybrid structure where it also sells hosted CRM applications may not be a formula for success in a competitive market where its getting squeezed between the big ERP vendors and the pure-play hosted CRM services.

      Siebel may seem an attractive buyout target with a stock price of $8.80 and $2.2 billion in the bank. But Tom Siebel has a lot of ego and sweat equity invested in his company. He is unlikely to go looking for a suitor. Then it becomes a question of whether Oracle or SAP wants to acquire a CRM company. Both companies already have fairly strong CRM applications in their portfolios and likely have little desire to spend perhaps billions trying to acquire Siebel.

      Shaheen may find that he can only preside over a slow but steady decline.

      There are times when even the best business managers find it impossible to change a companys fortunes. Lawrie may find that losing his job at Siebel was one of lifes tender mercies.

      John Pallatto is a veteran journalist in the field of enterprise software and Internet technology.

      /zimages/5/28571.gifCheck out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.

      John Pallatto
      John Pallatto
      John Pallatto has been editor in chief of QuinStreet Inc.'s eWEEK.com since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and computer technology trade journals. He was an eWEEK managing editor from 2009 to 2012. From 2003 to 2007 he covered Enterprise Application Software for eWEEK. From June 2007 to 2008 he was eWEEK’s West Coast news editor. Pallatto was a member of the staff that launched PC Week in March 1984. From 1992 to 1996 he was PC Week’s West Coast Bureau chief. From 1996 to 1998 he was a senior editor with Ziff-Davis Internet Computing Magazine. From 2000 to 2002 Pallatto was West Coast bureau chief with Internet World Magazine. His professional journalism career started at the Hartford Courant daily newspaper where he worked from 1974 to 1983.

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