Can Siebel Survive This Latest Crisis?

May 12, 2005

Can Siebel Survive This Latest Crisis?

Can Siebel Survive This Latest Crisis?

by Rikki Kirzner, Partner

After being on the job for less than 1 year, Siebel Systems’ CEO Michael Lawrie is history. Lawrie, a well-respected 26-year veteran of IBM, was recruited to help Siebel reinvent itself in light of its fast growing competition and a market that was becoming saturated with rivals. Tom Siebel turned over the reins of his company to Lawrie, in May, 2004. At that point, Siebel, one of the early inventors of CRM, had forgotten that success is based more on pleasing customers, than trying to grow faster than the competition at the customer’s expense.

In recent years, Siebel was under pressure to maintain its leadership position over competitors like Salesforce.com, SAP AG, and Oracle/Peoplesoft. In its desperation to maintain its market share Siebel became indifferent to its customers needs and demands. The company ignored complaints that the software was difficult to install, learn, and use. Even more troubling, the company became indifferent to customer complaints that they weren’t getting what they expected from their investments. Siebel appeared to be more focused on selling additional seats, than adding value to its customers’ businesses.

Lawrie spent his short tenure rebuilding customer loyalty and creating a customer-centric strategy. He overhauled the business structure, management team, and most of the internal culture in an attempt to get the entire organization focused on helping customers achieve good business results, rather than pushing product sales. Lawrie turned the company’s attention towards increasing service revenues and emphasized reseller partnerships as the path to growing market share.

Under Lawrie’s watch, Siebel solicited customer feedback to drive changes and improvements to its technology. It released a new version of its OnDemand CRM product and improved its analytics capabilities to help its customers obtain better business intelligence. While Siebel’s fourth quarter sales and profit were the highest they have been in 2 years, Siebel just issued a warning that this coming quarterly revenue would be the lowest in more than four years. The board blamed Lawrie for not turning the company around fast enough and showed him the door. George Shaheen, former CEO of Webvan, the poster child of the dot com failures, and a Siebel board member since 1995, will become the new CEO.

Hurwitz & Associates believes that this move may have been short sighted on the part of Siebel’s board of directors. The type of turn-around Lawrie was trying to accomplish in moving from customer disloyalty to increased confidence and increased sales, requires more than 11 months of effort-particularly in a weak economy and tight market. After all Lawrie’s work to reassure its customers that Siebel is now listening to their demands, it dumped the one person that customers were beginning to trust. We believe many Siebel customers will perceive this action to be yet another display of callous disregard for their business needs.

Siebel is asking its customers to accept at least one or, if Shaheen relegates the position to someone else, possibly two new executives who will want to restructure the management and company strategy again, to suit their specific agenda. Is this move-as the old adage says-penny wise and pound foolish?

Unless, Shaheen can quickly move to restore customer confidence while trying to implement a new and different plan to increase profits, we believe Siebel will become little more than a good acquisition target. We also believe that it will require a supreme effort on the part of Shaheen or his successor to restore Siebel to even a resemblance of its former prominence.

 

Newsletters 2005
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