Theory and Practice, April 25, 2005: Siebel Chapter 2 - A Suprise Ending

On the heels of announcing that first-quarter results would fall short of Wall Street expectations, Siebel Systems announced on April 13, 2005, that CEO Michael Lawrie agreed to resign and named former Andersen Consulting CEO and longstanding Siebel director George Shaheen CEO to replace him. In May 2004, Lawrie was introduced with much fanfare as Tom Siebel's top choice to lead the company, and he boldly defined the companies new "Chapter 2" strategy focused on providing value to its customers. He outlined plans to fill out Siebel's product suite and promised that Siebel would focus on ensuring its customers deployments were successful.

Less than one year later, Siebel finds itself in a tenuous position facing challenges from all directions in the CRM market. There is top-down pressure from the high-end enterprise software players, such as SAP and Oracle, and bottom-up pressure from the low-end hosted "on demand" software-as-a-service players, such as Salesforce.com and RightNow. In addition to finding itself pressured from both the top and bottom in its core market, Siebel faces pressure from the sides as it bumps up against established business intelligence players, such as Cognos and Business Objects, as it attempts to expand its footprint horizontally.

As a result of these market conditions, plus increasing pressure from investors, Shaheen will face many challenges in the short term as he seeks to write the next chapter in the Siebel story. He must take decisive action in the short term to define Siebel's "go forward" strategy to rebuild both customer and investor confidence. First he needs to define Seibel's product strategy, in particular whether the strategy is to fund internal development or use some of its more than $2 billion in cash for acquisitions. Second, he needs to more clearly define Siebel's small and medium-sized business and industry vertical go-to-market strategies, areas that have historically been challenging components of Siebel's overall strategy. Third, he must demonstrate his commitment to building a customer-focused company (a key strategy component from Chapter 2).

Siebel has solid functionality, has become competitive as a hosted solution and, in spite of its poor performance, remains financially strong. For existing manufacturing customers, Manufacturing Insights recommends that you continue with your current plans. For prospects, if Siebel is on your short list, Manufacturing Insights suggests that, because of the pressures described above, you have an opportunity to make Siebel work harder to gain your business. One final note of caution however: When weighing your options on how best to proceed, recognize Siebel is and will continue to be a potential target for acquisition from a larger rival.