Siebel Systems' New CEO

Siebel Systems has announced that Tom Siebel is stepping down as CEO of the company he cofounded in 1993, and that IBM executive J. Michael Lawrie has been hired to replace him in that role. Siebel will remain chairman of the company's board of directors. The move continues the recent technology industry trend of realigning corporate governance by splitting the roles of chairman and CEO. Several other major companies, including Microsoft, SAP, and Dell, have made similar changes in recent months. Siebel himself asserted that this wasn't a spur-of-the-moment move, telling analysts after the announcement that "this stems from a decision I made a little over a year ago to separate the roles of chairman and CEO." Lawrie, who until Monday had been IBM's senior vice president and group executive of sales and distribution, and led its global operations, told analysts after the announcement that his firsthand experience using Siebel Systems software at IBM will be a major benefit in his new role, as will his more than 26 years building and running IBM's global operations. Lawrie was "our first choice for the job," Siebel told analysts. Erin Kinikin, Forrester Research vice president and research director, says Lawrie's past aligns well with Siebel's future: "Siebel [Systems] has to develop a sales channel and a mindset that makes them easier to do business with, [and] that's what Mike Lawrie did around the world for IBM." Chris Selland, vice president of sell-side research for The Aberdeen Group, also makes special note of Lawrie's experience at IBM: "Siebel Systems' [future] success will be primarily determined by its ability to retain and expand existing relationships, something that has never been Siebel's core competency, but something that IBM is very, very good at." "Lawrie has deep experience," says Nathan Schneiderman, vice president of equity research for enterprise software at brokerage Wedbush Morgan Securities, which nevertheless downgraded Siebel Systems' stock following the announcement. "He's run large organizations, has experience internationally, and experience in sales. But it's still a pretty big transition," Schneiderman says. Schneiderman explains his rationale for the downgrade as having little to do with Lawrie's long-term chances for success, but rather that "he's going to need some time to get his arms around the situation at Siebel...[and] to figure out what he's going to do." He also suggested that the change might be a signal that Tom Siebel will no longer be involved in the sales process, which, Schneiderman says, could be a bad move. "[Siebel] has been vital to getting the company's big deals closed, and this company is big-deal dependent," Schneiderman says. Siebel addressed this point in the conference call by saying in no uncertain terms that "the executive team will report to Mike." Still, he added, "our partners and our customers feel they can reach out to me whenever they feel so inclined." Zach Nelson, CEO of NetSuite, predicts that Siebel "may have a real hard time keeping his hand off the steering wheel," and runs the risk of making it "hard for [Lawrie] to make changes." In fact, some industry insiders say that Siebel's presence is likely to be felt for the foreseeable future. "As anybody who worked at Siebel can tell you, nothing happens at the company without Tom's say-so," says Steve Garnett, who spent five years at Siebel and is now the senior vice president and general manager of Europe, Middle East, and Africa for Siebel competitor Salesforce.com. Schneiderman also notes that this shift may bring about further changes in the top ranks of Siebel executives. "We can expect [other] management departures," he says, referring to people within Siebel who may have seen themselves "as possible successors, [or] as being groomed for that. Their phones may be ringing with offers." Salesnet chairman and CEO Mike Doyle says he expects "a terrific housecleaning within [Siebel Systems]--or else the company is going to get sold." Lawrie told analysts he plans no major upheavals for now: "The intention is to stay with the team [currently] in place." He promised that there would be "no disruption to Siebel Systems' internal team and internal plans...and no interruption to the value and the services that we are continuing to deliver to our customers." The biggest difference from the management change, analysts suggest, may be in the change of corporate culture that Lawrie brings to the company. "Tom Siebel is a classic hyperaggressive, driven executive who was the right leader during his market's hyperaggressive, growth phase," Aberdeen's Selland says. "But the company--and the market--has matured, and it's been pretty clear that the company's strategies and leadership were due for a similar change." Salesforce.com's Garnett says the culture change will be dramatic. "Tom Siebel is pretty dictatorial in how he runs the company," Garnett says, adding that Lawrie "is an excellent executive," having worked with him in the past. Aside from the analyst conference call, Siebel executives, spokesman Steve Diamond says, "are currently very busy communicating with employees, partners, and customers," and were unavailable for further comment. Representatives for competitors Oracle and PeopleSoft also declined to comment, as did representatives at IBM. Other Siebel competitors see the move as suggestive of larger generational trends within the industry, which, not surprisingly, the upstarts claim may favor them. "The unstoppable shift to on-demand CRM has happened," Salesnet's Doyle says, adding that Siebel's board has "sent a pretty strong message that the way Siebel [Systems] is going to deal with its customers will change." NetSuite's Nelson says he sees the move as "a changing of the guard in many respects--not just at Siebel, but for the entire market. Clearly this is a turning point in the market, but what the turning point means we won't know for about a year or so." Scott Nelson, Gartner vice president and research director, agrees that the executive change shows that the industry is maturing. Siebel Systems' founders, he says, "have done a great job of launching the CRM ship, [but] now it is time for industry veterans to steer to warmer ports." Gartner's Nelson also says it's a positive move for the company: "It takes one kind of person to start and build a company, another to grow it to a mature software company. I think Tom Siebel realized that, and in the long run I think it will be good for both Siebel and their customers." Siebel, who gave up the title of president in 1999, retains his 10 percent share of the company. As he told the analysts during the conference call, "I'm not going anywhere."