Super Siebel!

In 1993 Tom Siebel started his company in East Palo Alto, CA, paying rent of 11 cents per square foot. Last year, his company reached $790 million in sales and a market cap of $41 billion. With a net worth of $6.4 billion, he ranks number 38 on the Forbes list of the richest people in America. Tom travels in a private jet and is a master at creating business alliances designed to serve his customers and expand the global reach of Siebel Systems. To top off Siebel’s 2000 growth spurt, in October 2000 Tom acquired Janna Systems, valued at $972 million. NOW THAT’S SUPER.

“I’m a strong believer in leadership much more than I am in management,” says Siebel. “I think the best managers manage by example, and this is what I try to do. I probably spend 60 to 70 percent of my time visiting customers, making sure they’re succeeding with their projects, checking on the status of their projects and finding out what I can do to help. I think that sends a very strong message to our 4,000 employees around the world about what’s important here.”

The Product
Ever since the mid-eighties when he was working at Oracle, long before Siebel Systems opened its doors, Tom Siebel already had imagined the company he wanted to create. In 1993 when he and Pat House, a former colleague from Oracle, started Siebel Systems, his vision was clear: “I thought that if a company built a robust, scalable solution built upon a modern technology platform scaled to meet the needs of even the largest multinational companies – that would allow organizations to successfully apply information technology and communication technology to the problem of establishing and maintaining customer relationships – that there would be a significant opportunity there.”

It was obvious that Siebel had a well-thought-out product niche. No doubt other companies had the same idea, but they did not succeed. Why? “An area where companies frequently fail is in the product design process, really,” Siebel explains. “Many companies don’t spend enough time talking to their customers, talking to their market, understanding the market requirements and making sure that those market requirements are accurately reflected in the next release of the product. And so the product that they ship is not well received. A lot of these issues really boil down to a robust product specification process in the company, and I think this is an area where many, many software companies have a lot to learn.”

So, what specifically about Siebel’s product line has led to its success? “I think that a very important milestone for this company, and one of the reasons why we succeeded where others did not, was related to our ability to solve the problem associated with the data synchronization and replication requirements of a highly distributed, nomadic executive workforce,” says Siebel. “We developed a very unique solution to that problem that allowed us to successfully deploy our applications into very large field sales forces and very large field service organizations and sort of make it replicate this data and synchronize it very quickly. I think that our ability to solve that problem was a major, major milestone and one of the reasons why we succeeded where others failed.”

The company didn’t stop there. Siebel describes another significant, more recent advance in the products: “I think the release of the Siebel eBusiness Applications…that came out in February of 1999…was a major step forward for us in our ability to deploy these applications over the Internet, with eSales, eMarketing and eService.”

The People
With a technical vision that takes advantage of emerging technologies, Siebel’s products continue to evolve and anticipate the market’s needs. Yet, how much of his company’s success does Siebel credit to his people? “You know, I think ultimately we have a very, very rich human capital base here – some of the most experienced people in the information technology business. This is the raw material from which all of our products and services derive,” he says. “To the extent to which we have high-quality products or high-quality service offerings, or training offerings, or customer service functions, those all result from our hiring policies. And you know, I think we’re very, very fortunate in that respect to have such a team of gifted people who are individually and collectively focused on doing whatever it takes to make sure that each and every one of our customers succeeds. That is the root from which all of these other manifestations accrue.”

Work Environment
In San Mateo, where the definition of “business casual” has been expanded to include jeans and T-shirts, Siebel is the exception. Siebel makes it clear that the company has a very professional business environment: “We carry ourselves with pretty high levels of professionalism. Our facilities are very professional and neat. Our people who meet with customers are dressed appropriately. We pride ourselves in approaching our jobs with high levels of professionalism. You understand that our customers are some of the largest companies in the world, and these decisions that they’re making are at the heart of their strategies for the next decade. These are ‘bet-the-business’ decisions. They want to become e-businesses and they want to deal with a partner who’s going to help them become an e-business. And so when they get off the plane from Munich, or they get off the plane from Tokyo, or they get off the plane from New York to meet with us to discuss and formulate their e-business strategies, I think they expect high levels of professional courtesy and high levels of professionalism. We do everything we can to extend those things to them.”

Customer Relationships
When asked what Siebel Systems does to anticipate its customers’ needs, Siebel answered, “We have very, very close communications with our customers. We have all sorts of feedback loops over the Internet, over the telephone. These are on a 24/7 basis. We have people on-site in our customers’ accounts around the world. Our customers participate with us in technology briefings and in product sessions. We have a technology advisory council that consists of a wide range of Siebel customers. We have a very, very active Siebel users’ group that facilitates communications between Siebel users and the company. We have, I think, 500 product-marketing people who do nothing but work to understand the needs of the customers and make sure that those needs are reflected in our product specifications. So I think we have a very, very rich fabric of customer communication technologies in place that allows us to keep very close tabs on the customers’ requirements.”

And what do customers say about the company? “We have achieved 98 percent customer loyalty,” Siebel points out. “We’ve achieved the highest levels of customer satisfaction in the software industry. The products that they’ve received from us exceed their expectations.”

Marketing Strategy
Here are the five key elements of Siebel’s stated marketing and sales strategy:
1. Target large multinational customers in a broad range of industries.
2. Maintain and extend advanced technology position.
3. Procure global strategic alliances.
4. Promote successful customer implementations.
5. Expand global sales capabilities.

The success of the first two strategies is apparent, with Siebel’s list of customers [see box] including an impressive array of the “Who’s Who” of both American and international businesses.

As for procuring global strategic alliances, Siebel Systems is known for its extensive partnerships with other software vendors, consulting firms and systems integrators, platform vendors (hardware, database, network products and services, operating systems and application hosting services) and content providers (information providers, research companies, vertical market data content providers, strategic consulting companies, sales and service process consultants and sales methodology vendors). “We set out early on to form a rich fabric of long-term strategic business alliances, and these would be our go-to-market partners with whom we would engage in our joint research and development and technology transfer,” Siebel explains. “We’d bring products to market together and make sure our customers succeeded together. And that’s been a very, very successful initiative for us today. We have more than 600 software and professional services companies with whom we go to market on a global basis and it gives us an incredibly rich support infrastructure to be able to lean upon.”

Regarding consulting firms, Siebel adds, “We spent a lot of time in enabling our professional service partner at firms like IBM, PricewaterhouseCoopers and Andersen Consulting to build the infrastructure to make our customers successful. Today I think we have more than 10,000 full-time trained Siebel people there with our partners. That’s critical. Companies forget to do that. We’ve spent a lot of time over a lot of years putting this infrastructure in place. And, you know, I think that’s key that those support mechanisms be in place.”

As for their most significant alliance to date, according to Siebel, “A very important milestone in 1999 was the formation of the strategic business partnership between IBM and Siebel Systems. And, I think, in the e-business market that will prove a watershed event.”

To promote successful customer implementations, the fourth element of the marketing and sales strategy, Siebel Systems actively supports its customers’ deployment efforts by providing Internet and telephone technical support and comprehensive instructor-led training. They also assign to each customer an account management team that consists of a sales representative, a technical account manager and an executive sponsor.

Always expanding its global sales and marketing capabilities, Siebel Systems already has operations in at least 28 countries. The company intends to further expand by increasing the size of its direct sales and marketing organizations in major markets worldwide and by continuing to develop its channel partner relationships.

But isn’t being number one an advantage in itself? Do customers choose Siebel because of its position in the market, rather than for all of its fine marketing and sales efforts? “In any serious evaluation of e-business application software, we are in the room,” Siebel answers. “There is no evaluation of these systems anyplace on the planet, I think, where we are not invited to be included in the consideration set. So I think that’s the advantage of market presence. We don’t have to claw to get our way in the door. We are invited to participate in virtually every significant opportunity.”

Acquisitions
Over the years, Siebel has acquired several companies, including InterActive WorkPlace Inc., Nomadic Systems Inc., Scopus Technology, The 20-20 Group, OnTarget Inc., Paragren Technologies Inc. and OpenSite Technologies Inc. Regarding the acquisition of OnTarget in 1999, Siebel explains, “OnTarget was a very important acquisition in that we became as a result of that acquisition the world’s leading provider of sales training and the world’s leading provider of sales training methodologies…That was an important acquisition that allowed us to manage the change-management process and facilitate our users’ becoming productive as rapidly as possible.”

Other acquisitions stand out as well. Siebel notes, “The acquisition of Scopus was a very important milestone…It put us in the position where we became the world’s leading provider of sales automation systems and the world’s leading provider of customer service systems.”

And future acquisitions? Siebel explains that the company is actually focused on growing the business organically rather than through acquisitions. Siebel may, however, make an exception to fill in another niche in the product family if the opportunity arises.

The Management Team
Tom Siebel started Siebel Systems after a three-year stint as CEO of Gain Technology. From 1984 through 1990, he was an executive at Oracle Corporation, where he held a number of executive management positions. In January of this year, Business Week recognized Siebel as one of the top 25 managers in the world. He is also the author of Virtual Selling: Going Beyond the Automated Sales Force to Achieve Total Sales Quality (Free Press, 1996) and Cyber Rules (Doubleday, 1999), and serves on the board of advisors of the University of Illinois College of Engineering, the Stanford University Graduate School of Business and the Stanford University Law School.

Yet Siebel credits the experience of the company’s management team as the primary competitive advantage Siebel Systems had over other companies in the marketplace through the mid-nineties. “I think we had a lot more experience in building and managing software companies, in designing products, in putting together support infrastructures, in bringing products to market, in marketing and selling, in keeping customers satisfied, negotiating licensing agreements and engaging in strategic partnering arrangements. Quite honestly, we just had a lot more experience in all of these things as a team than other companies in the market did. So when they were trying to figure these things out for the first time, we had been doing it for 10 years.”

In addition to Siebel, the rest of Siebel Systems’ management team includes some heavy hitters, some of whom are also his former associates:
– Paul Wahl, President and COO (formerly of TriStrata and SAP America Inc.)
– Patricia House, Executive Vice President and Co-founder (formerly of Oracle)
– Howard H. Graham, Senior Vice President, Finance and Administration and CFO (formerly of Informix Inc., Wyse Technology and Zenith Electronics)
– Craig D. Ramsey, Senior Vice President, Worldwide Operations (formerly of nCUBE)
– R. David Schmaier, Senior Vice President, Products (formerly of Oracle and Braxton Associates)
– Myron “Mike” Saranga, Senior Vice President, Engineering (formerly of Informix Inc.)
– Karen M. Riley, Vice President, Global Services (formerly of IBM)
– Jeremy P. Coote, Vice President, North American Operations (formerly of SAP America)
– Thomas E. Hogan, Vice President, International Operations (formerly of IBM)
– Kirk Krappe, Vice President, Industry Solutions Marketing (formerly of Oracle )

Lessons Learned
No one rises to the top without tripping once or twice. When asked what the company has learned from previous mistakes, Siebel addresses an area where there has been some criticism. “Well, I think that it’s important to concentrate on all of the training aspects of using a technology like this. There have been times when we clearly very frequently focused almost exclusively on the issues of application deployment, and not enough attention was paid to all of the change-management issues that are required to achieve a successful application deployment. These include sales training, systems training, the promotional marketing programs and the various cross-compensation programs that we might have around the company to make sure that everyone is cooperating. There are many, quite intricate issues associated with change management that are frequently overlooked. And when we see projects slow down, it has to do with the fact that this sort of planning process did not occur.”

Many Keys to Success
Why has Siebel risen so quickly to the top of the heap, virtually dominating the CRM market? According to Siebel, “I think that Siebel Systems today is a reasonably large application software company and I think that our market advantages have to do with the fact that we have a very strong market presence. We have a very high-quality product in the marketplace. We have achieved the highest levels of customer satisfaction in the software industry. We have a large and growing global footprint. We have a company that is financially run in a very disciplined manner and is rock-solid in its degree of soundness. I think today we have the strongest management team in the software industry aboard at Siebel. So there are many, many attributes today that are contributing to the success of this company.”

Looking Ahead
When asked for a prognostication on the future of the industry, Siebel predicts, “continuing shift to the Internet, a much tighter integration of the cell phone with our computer networks and a larger emphasis on software agent technology for buying agents and e-business agents. These are actors that will behave in the e-business economy independent of their handlers; that will engage in product acquisition, product selection, product enhancement on their own; that will go out and be collecting things and buying things for companies and for consumers.”

Although Siebel feels that the company is well positioned to face the future of the industry, he does believe there will be some challenges. Although he credits Siebel System’s management experience in large part for the company’s success, the management of their growing and globally expanding company is his greatest concern for the future. “I think the biggest challenge Siebel is going to face as it continues to grow is the extent to which we can continue to foster this corporate culture of a group of now thousands of individuals operating in 60 countries around the world, all of whom are totally committed to do whatever it takes to make sure that their customers succeed. We’ve scaled that culture well from 10 people to 4,000 people, and now we need to scale it to 20,000 people. That’s the biggest challenge this company will face.”