Tom Siebel’s Transition

Tom Siebel announced this week that he is giving up the daily grind of running the company he started and instead plans to concentrate on his role as chairman of the board. Taking over as CEO is Mike Lawrie, a 26-year IBM veteran.

There’s no doubt that Siebel will continue to have a great influence on the company he founded, but there are so many layers to this decision that it is inevitable the significance of Siebel’s move will be debated for some time.

Why Now?

In tactical terms, this was a good time to bring in another person to run the business. With the release of Siebel 7.7, the company has firmly put the headaches of the transition from client-server to Web architecture behind it. It has a stable, easy-to-use and high-performing application suite that targets 23 verticals with 70 applications. Recently, the company revealed at its EMEA user group meeting in Cannes, France, that it will execute on big plans in banking, vertical markets, analytics and other areas over the next few years — providing a sizable foundation upon which new management will be able to build.

Moreover, with the economy rebounding and revenues picking up, Tom Siebel has proven his ability to weather the burst of the Internet bubble and the economic downturn and position his company atop a dwindling list of CRM suppliers. No one can accuse him of bailing. With the CRM industry in the early part of a consolidation, now is a good time to hand over the reins and let someone else deal with this emerging challenge.

Strategy

Of course, no one knows what the future will hold for the company or the CRM industry in general, but strategy had to play a major role in Tom Siebel’s decision not simply to give up the CEO title but to bring in Lawrie, who at 50 has spent virtually his entire career at IBM, as his replacement.

Lawrie’s credentials are impressive — most recently, he managed US$80 billion in revenue as IBM’s senior vice president and group executive of sales and distribution. On paper, he looks like the kind of individual who can help take Siebel to the next level — but there are important differences between running an $80 billion business at one of the largest technology companies in the world and running one of the most entrepreneurial.

Despite those differences, however, the choice of Lawrie seems to make sense. As a $1.35 billion company, Siebel is big by CRM standards, but it is dwarfed by many of its clients and some of its competitors that offer multiple lines of business software, such as SAP and Oracle. The business software industry is at the beginning of a consolidation phase, and every company needs to continually assess whether it should remain independent or find a partner with suitable synergy. For Siebel, if such a partner is needed, it could easily be IBM.

What the Future Might Hold

Siebel has shown great affinity for both IBM and Microsoft in the last few years, working in partnership with each to ensure its technology stack is fully at home in both Java and .NET environments. Moreover, Siebel has worked to ensure integration of both Microsoft’s Outlook and IBM’s Lotus Notes into its desktop. More and more, however, it appears that Siebel and IBM are destined for a closer relationship than Siebel and Microsoft.

Several developments point to that conclusion. For example, IBM is Siebel’s OnDemand hosting partner, and hosting is an increasingly important topic in CRM. Also, consider that IBM’s WebSphere, one of several integration servers, is a key component of Siebel’s universal application network (UAN), and that IBM Global Services is one of Siebel’s major implementation partners.

Then there is the issue of banking. IBM has deep roots in the financial services industry, and those roots are important to Siebel’s initiative in branch banking, which includes the recently announced acquisition of Eontec.

Also, Siebel competitors like SAP and Oracle coincidentally are also competitors with IBM in integration servers and databases, to name two areas. It would not be a surprise to see Lawrie bring in additional IBM alumni to help run the business and continue battling common foes. And since we don’t know what the future will hold, if an acquisition were to be the prudent move for the business and shareholders, not only would IBM be the logical choice, but a great deal of the preliminary technical and cultural accommodation already would be in place. For many reasons, from a Siebel perspective, a closer relationship with IBM is far more appealing than a combination with rival Oracle, where Tom Siebel once worked.

Personal Perspective

From a purely personal perspective, Siebel’s departure makes a certain amount of sense as well. He’s been at the helm of the company since its inception more than 10 years ago. As an entrepreneur, he and a small band of close associates went from receiving no salaries for 18 months to becoming one of the most successful software companies on record.

Siebel, who has graduate degrees in business and computer science, managed the company through numerous transitions during that time, including consolidating CRM functionality into a suite of six basic functions; converting from client-server architecture to a Web-based one; launching customer-driven vertical solution suites; incorporating analytics functions into the company’s line of business applications (the list is a long one); and positioning the firm in the evolving on-demand market for business applications. In the midst of all that, the company grew from a small business occupying less-than-opulent office space in East Palo Alto into a global business software provider with nearly 500 products in something like 24 languages.

At the Siebel EMEA user group meeting last month, Ken Jarvis, CIO of the South African Revenue Service, described doing a deal with Siebel via telephone over the course of about a week. The negotiations took place early in the morning, San Mateo time, and ended daily when Tom had to get the kids ready for school. After 10 years of early-morning meetings and negotiations, plus the pressures and responsibilities of running a fast-growing company, maybe it was just time to try something else.

Why not transition now? Life is short.