Siebel's New CEO Discusses Shift To Customer Service

Siebel Systems Inc. in early October held its annual user conference, the first time in the customer-relationship-management software vendor's 11-year history that the annual event wasn't presided over by founder Tom Siebel, who stepped down from the CEO post in May. The event is seen by some as the company's most important customer gathering ever. Not only is Siebel Systems under the leadership of new CEO Mike Lawrie, it's preparing to announce promising third-quarter earnings on the heels of a disastrous second quarter, and it's facing more competition--and skepticism about its future--than ever before. InformationWeek's Tony Kontzer caught up with Lawrie at the user conference to discuss his efforts to shift Siebel's emphasis from product development to the customer, what that evolution means for Siebel and its customers, and the state of the CRM market.

InformationWeek: What are customers telling you?

Lawrie: They are beginning once again to focus on growth. We've been through a period here for four years where there has been a preoccupation with cost reductions as a way to drive productivity and profitability. That agenda is clearly shifting to how you improve your top line. Once you begin to think about your top line, you begin to think about your customers and the markets that you're in. And when you begin to think about that, you begin to think about the systems that you have in place to provide differentiation for your customers.

InformationWeek: Has Siebel done enough to ensure that a customer achieves CRM success?

Lawrie: No, I think that we have just gone through generation one of CRM, and what we thought was going to be the outcome in generation one, like everything else in life, has proven to be a little different. So it's not just about the software, it's about all these other variables. And then you get to the question, who's delivering those other variables? Well, I thought the systems integrators were doing that, or I thought the customer themselves were doing that. But it turns out that, in fact, it's not being done. So the question is what do you learn from that, and how do adjust to what you've learned so you can deliver better outcomes?

InformationWeek: Siebel just put out a very encouraging pre-earnings announcement, including improved licensed revenue and an expected rise of 500% in operating income. Given that there have been very spotty results from a lot of vendors over the past several months, what are the chief things contributing to Siebel's recovery?

Lawrie: For one, I do think the value proposition for enterprise application providers is changing. People are interested in results, in business outcomes. And I think there are new markets that are emerging--areas like business intelligence and business analytics--as a way to drive more value from the current investments. You also see a fair amount of investment around security and privacy and scalability and the total cost of ownership of these systems. To the degree that enterprise software applications providers adjust their business models, and build the organizational capability to provide these requirements to customers, there are going to be new success stories, and there will be losers. In the meantime, you see up and down performances as those companies adjust their business models to account for the new reality.

InformationWeek: What differentiates the winners from the losers?

Lawrie: In this stage, it's the value proposition. The ability to deliver business outcomes, to listen to your customers, and to adjust to their requirements. Their issues will define the winners and the losers going forward.

InformationWeek: What's your view on how software componentization and customization may transform the software industry?

Lawrie: In many ways, this technology shift has really been around for 20 years. The technology industry doesn't change nearly as fast as people think it does. We've been talking about object-oriented programming for 20 years. Componentization is object-oriented programming. The difference is, years ago there was no easy way to integrate those objects. But with the introduction of standards like XML and BPEL and other integration standards, the ability to reorganize and integrate those objects or those components has become much more feasible.

I believe this combination of being able to separate and digitize business process and link that to software components will allow companies to rearrange their business processes and be more agile and responsive to the ever-changing marketplaces that they serve. And, that is a significant shift in the landscape. It doesn't mean that what you're doing goes away. It just means that it's different and now you participate in, frankly, a bigger game than you were participating in before.

InformationWeek: Is there anything in today's CRM market that you would consider hype?

Lawrie: No, I think the CRM market has become very realistic, and has become very pragmatic in its approach. Hey, here are the five or six things that you need to do. This is corporate governance. This is strategy. This is how you manage process, this is how you manage data quality, change, and user adoption. If you had come to one of these events six or seven years ago, I'm willing to bet there wasn't a keynote address with the five or six variables that were required for success. It was more about product. Well, the product did a lot, but it didn't do everything. It goes beyond the technology. That's jacks or better.

At the end of the day, it's your customers--your relationships, what they think about you, how they think about you in terms of being able to get their missions accomplished--that's the asset. Yet, in many ways, we're just at the very beginning of how we really codify, how we institutionalize, and how we improve the relationships we have with our most important asset, the customer. That's the opportunity.