Youve made the SMB space a priority for Siebel. Is that something you learned at IBM, or is that just the market reality for all companies right now?
I was responsible for SMB at IBM, so, yes, I have a long history in that marketplace. But, fundamentally, it is a marketplace that has enormous potential, its highly fragmented and many of Siebels offerings fit the needs of the customers in that marketplace.
But we had to rethink our distribution strategy; we had to rethink the products that we built so that the products were applicable to the requirements of that marketplace; we had to put an organization together to go focus on that, a financial model appropriate to the small- and medium-business marketplace. So, yes, all those things I was very familiar with and certainly have used some of that knowledge to help us begin to build the organization and products necessary for Siebel to compete successfully in the marketplace.
In the late 1990s, IBM did a lot to build out the extensive partner program they have today. Its been a very successful program since then. How much has that or is that going to affect the way Siebel deals with partners?
I think of partners the way I think of customers. Thats No. 1. Its a two-way relationship. They have needs. If Siebels going to be a good partner, IBMs going to be a good partner, we have to satisfy those needs. IBM or Siebel has needs, and our partners have to help us fulfill those needs. So its about listening, its about creating a win-win, so business partners business can grow and prosper, and so Siebel or an IBM can grow and prosper. As long as you keep those things in mind, then you approach business issues and business problems in a way that can be very positive and helpful to both organizations.
Will Siebels partner program start to resemble IBMs in any way?
Along those two criteria where we treat partners like customers and we listen to them and we respond to their needs, you bet.
Is that something you found had been neglected when you got here?
I think because of the shift in the marketplace and the emerging requirements of our customers, it required an update to the relationships that we have with our business partners, yes.
What was the biggest cultural difference you found coming to Siebel from IBM?
In some respects, the culture was similar. Siebel has a very strong sales culture; IBM has a very strong sales culture. IBM is very professional; Siebel is very professional. IBM is very disciplined, a very process-driven company. In many ways, Siebel is very process-oriented and -driven.
Where the culture was different was that Siebel had really never gone through any kind of a downturn. They didnt have the experience of what thats like—how to deal with that, what are the managerial and leadership moves and changes that you need to make. So it was a culture that had only been used to being on a very rapid growth curve.
The culture associated with growth is different than the culture that needs to be associated with how you transform your business.
When you need to transform your business, you need to listen very carefully to your customers. You need to take that customer input and drive that into your future development, future products. You need to think about your partners, how your partner community—weve already talked about it—needs to be reoriented. You need to hold a mirror to your face and say, “Gee, what am I doing thats no longer relevant to the marketplace that I am competing in? Whats no longer relevant that Im doing in terms of what my customers now expect of me?”
In IBM, that is a normal way of thinking and approaching the business. Siebel had no experience in their culture of doing that.
The other big thing was Siebel was highly, highly centralized in that decisions were made by just a few people. Now IBM is also reasonably centralized, but much of the decision making and much of the innovation comes at the point of contact with customers and point of contact with the markets at IBM, and [at Siebel] not as much of that innovation came in the organization and came up through the organization. So it was a very top-down organization and culture as opposed to a bidirectional culture.
What is it now?
We are beginning to build more of that culture. That culture is not something that you turn a light switch on and off at night. Thats measured in years. Its affected by people that you bring in to your senior leadership teams. Half our senior leadership team is new over the last six or eight months. Its brought about by how decisions are made and how people are expected to behave. Its about core values.
We completely redid our core values in what we call Siebel Chapter 2. So our core values are geared toward [the idea that] our success is our customers success. Things like our commitment to our employees, to develop them and train them. So the culture becomes one of Siebel as an area, a company, an institution you can work for when you want to build and grow your skills and grow as a businessperson, as opposed to just a place that you want to go to sell software to make a couple bucks.
Its all about how we treat our customers—teamwork—so building a culture where we share ideas, a culture that we feed on each others strengths, as opposed to a culture that doesnt work in a cross-functional, across-team kind of way.
What was the biggest challenge when you got here?
Siebels biggest challenge was to get growing again. So from a business standpoint, the biggest challenge we had was to grow again. In order to grow again, we needed to help ensure that all of our customers were successful in the use of our technology and products to help them solve business problems, in short, to provide business value to our customers. The third biggest challenge was to get a strategy and a leadership team in place that could get the growth engine going and begin to help deliver the business value to our customers.
Let me ask that question another way: What was the biggest thing holding Siebel back?
I think in many ways the biggest thing holding Siebel back was Siebel. Clearly the economic environment has been more difficult since the dot-com implosion, theres no question about that. Customers through that period of time have continued to spend money, but theyve wanted different things. Theyve wanted help in figuring out how to solve business problems; theyve wanted help in integrating and making less complex many of their application infrastructures. Siebel, because it had been so successful, continued basically down the same path of doing what had gotten them to be so successful. But in fact what customers were looking for had changed. And they needed to change with those changes in the customers.
If somebody were to really get inside Siebel and look at how things have changed since youve been here, what do you think would be the most important things that would stand out as different? A: From my perspective, I think the biggest thing has been to open the environment up where people can express their thinking as to what needs to be done. Much more teamwork, much more empowerment, more respect for a larger number of peoples opinions and thoughts. And more of a focus on what do our customers really need from Siebel Systems.
Tom Siebels still the chairman. How much do you consult with him, or has he pretty much stepped back and let you run the show?
I consult with Tom. Toms got a wealth of knowledge, and I leverage that and tap into that knowledge frequently. Tom doesnt run the business anymore; I run the business. But when you have someone of that knowledge around, you want to try to tap into that knowledge as much as possible. Some of that input I get from Tom I use— its very valuable—and other [input] I dont use.
How important is the hosted application services business—such as Siebel CRM OnDemand—to Siebels future? Is it the future of software?
I think its important to Siebels future for sure. Do I think its going to take over the software industry? No, I dont. … Its important to Siebel because its important to our customers. Our customers want multiple ways of acquiring and deploying technology. They dont want just on demand. So my experience has been that our particularly large customers want a combination of things.
So in certain departments or certain geographies or certain functional areas, the on-demand model fits very well. Others, they want a traditional packaged application. And still others, they may want a highly customized application. So we think that the benefit of Siebel is that we can provide that capability in whatever format the customer wants for their business.
The most important thing is listening to what your customers want. And Im listening, and what theyre saying is, “I want a spectrum or wide variety of ways that I can acquire and deploy and maintain these applications.” I just think its good business to be able to provide all three of those.
How big one is relative to the other two years from now, I dont know. I dont want to be flippant and say I dont care, but my view is the customer will decide that. Our job at Siebel is to ensure that we can deliver that capability the way they want it. So I am not a big evangelist saying, “You know, the rotation of the Earth is going to change here, and the suns going to come up in the west”—Im not into that. What Im into is, here are the requirements the customers have and Siebel as a company; their responsibility is to develop capabilities to help customers with those needs and solve those problems.
What is the current status of the next-generation platform development efforts?
We have been working on this for over two years. Tom and I did sort of the initial investment around J2EE [Java 2 Platform, Enterprise Edition]. Weve been working with Microsoft [Corp.] for almost as long a period of time. This is a fairly involved project to basically build out a services-oriented-architected set of products. The development effort there is proceeding; were investing more people in that. So Id say things are moving along.
What about availability?
We havent even gotten to availability. The only thing I can tell you is that as we begin to bring this capability to the market over the next several years—I underscore the words “several years”—this will not be one thing. It will be some big things. Its a capability we will develop over time—[it] will be compatible with our existing product lines, one; and, two, were going to continue to invest in the product lines that we have out there, our 7x product line.
I think theres only a couple of companies that are making this-size investment—SAP [AG]s making a big investment here, as you know, and Siebels making a big investment. PeopleSoft [Inc.] had started there; remember they did the big announcement with IBM last fall? Basically, thats what Siebel did two years ago with IBM. So we have been working on this for several years.
Project Green Comparison
Do you think what youre doing is similar to what Microsoft is doing with “Project Green”?
I wouldnt want to comment on that; I dont know enough about it. The only thing I can say about Microsoft is that they are very much a key partner of ours in terms of the infrastructure that we are building our services-oriented architecture on top of.
Now that Oracle Corp. has succeeded in buying PeopleSoft, will that merged company be more of a threat to Siebel, or do you think it will actually be less of a threat since it is preoccupied with the post-merger process?
I dont know. Oracles a very formidable company for sure. Historically, their strength has not been applications. But, yes, I would consider them to be a powerful player in the industry. Just as I view SAP as a very powerful member of the industry. I consider Microsoft also, even though we dont run into them too much in the enterprise space, obviously. So, yeah, I think all of those guys are formidable competitors and, in some cases, partners of ours going forward.
Do any of those companies stand out above the others as competitors? I know SAP claims to be No. 1 in CRM [customer relationship management] revenues.
When I look at it, I just look at the number of active seats. By any measure, Siebel has got a very substantial position. What have we got, like 3 million active users now? SAPs got like 150,000 or something like that? So I dont get too excited about claims. I get more focused on whats the reality. And the reality is, What are people using to run their business? But having said that, SAP is certainly a big competitor of ours. They have a very strong position, particularly in manufacturing, distribution and high-tech industries, anyplace where you have a very strong supply chain and manufacturing orientation.
As they try to extend that predominant market position, they try to extend that to where we see the growth area, which is in these customer-facing systems. So, certainly, I view them as a competitor. The difference is I dont subscribe to this end-to-end suite.
… There will always be some customers that want to do that. But the majority of the industry is not going to want to tie up all their application architecture with one company. And companies are good at things. … My personal belief is the way to think about competing is you have to stick in those areas that youre really good at it, where you have the expertise, you have the knowledge, you have the intellectual capital, you have the products, you have the organizational capabilities, and not get too far afield from what you are good at.
And as long as youre in a market that is continuing to expand and grow, then you can carve out a very reasonable leadership position for yourself.
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