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MOVERS & SHAKERS By Steve Hamm December 15, 1999


Tom Siebel's Customer Culture Has Made Him a Software King
As the customer relationship market takes off, Siebel Systems and its CEO are growing mightily in stature and even spinning off a new Web business

When Tom Siebel started Siebel Systems seven years ago, it was on a shoestring. "We had the crummiest space in East Palo Alto" -- Silicon Valley's low-rent district," recalls Siebel, CEO of Siebel Systems Inc., a maker of customer relationship software for corporations. "I paid 10 cents a square foot -- literally." He and his small staff made do with used furniture. Many employees worked for the first 18 months for no salary -- just stock. And the company spent just $1.8 million dollars in the two years it took to release a first product. Unlike most Valley startups, Siebel accepted no money from venture capitalists. "Our sense of obligation was to ourselves," says Siebel.

All of that privation and self-reliance has now paid off richly for Siebel and many of his 3,000 employees. Thanks to a 400% runup of the company's stock this year alone, Siebel's personal stake now exceeds $1.4 billion, and many employees are millionaires several times over. And it's no wonder. For half a decade, Siebel Systems was the hottest company in a small market -- that of sales automation software. But now the market has broadened to include customer support and marketing, and it's expected to grow from $3.7 billion in 1999 to $11.5 billion in 2002, according to market researcher AMR Research Inc.

 

"It looks like the game is close to being over, and you have a definitive winner," says BroadVision's Chen
 

As the market takes off, the stature of Tom Siebel and his company is growing with it. The company's revenues of $195 million last quarter were up 87% from a year earlier, and profits of $30 million were up 114%. That growth rate helped it capture roughly a 70% share of the market last year. Meanwhile, traditional competitors -- like Vantive and Clarify -- stumbled and were acquired by larger companies in recent months, and mighty Oracle and SAP have been slow to mount challenges to Siebel Systems. "It looks like the game is close to being over, and you have a definitive winner," says Pehong Chen, CEO of e-commmerce software maker BroadVision Inc., who is a friend of Siebel's and an early investor in his company.

Siebel, 47, didn't go about building a successful company in the typical Silicon Valley way. Traditionally, many software companies have paid little attention to customer service. But from the start, Siebel created a culture that values customer satisfaction above all else. He decided that 30 percent of employee commissions and executive bonuses would be pegged to meeting specific customer satisfaction goals. And to remind employees that the customer is always right, Siebel decorates the walls of his San Mateo (Calif.) headquarters not with art work, but with photos of customers and their annual reports. He also names conference rooms after clients -- like Compaq, Marriott, and Prudential. "We're in the business of selling customer service software, and we tried to become the exemplar of that philosophy," says Siebel.

"A PERSONAL ETHIC." His style has clearly rubbed off on employees. Recently, for instance, after customer Intuit Corp. reported a problem with Siebel Systems' software just as it was about to complete a major deployment, Siebel's lieutenants dispatched a SWAT team to pinpoint the problem. It turned out to be a faulty installation of Microsoft's Windows NT operating system. Even so, the SWAT team spotted and fixed the glitch within 48 hours -- all the while providing Intuit with hourly status reports. "It's a personal ethic of Tom's," says Siebel Systems' co-founder and Executive Vice-President Pat House. "He does whatever it takes to make a customer satisfied."

Siebel isn't shy about his company's stellar customer service record. He pays for twice-yearly surveys by market researcher Prognostics Inc. and publishes some of the results in advertisements. In the most recent survey, for instance, customers gave Siebel Systems a 98% loyalty rating -- meaning they intend to buy from the company again. And they report solid results from using the software: They've gained an average of 15% in revenue growth, a 21% increase in their own customer satisfaction, and a 20% increase in productivity.

 

Siebel got IBM to sell his customer relationship software instead of Big Blue's own products
 

Siebel also wins points for playing well with others. Recently, he forged a crucial alliance with IBM under which the computing giant has agreed to stop selling its own customer relationship software and to push Siebel Systems' products instead. BroadVision recently agreed to a joint-marketing agreement, too -- something Siebel and Chen worked out at a lunch at their favorite sushi restaurant in nearby Palo Alto, Fuki Sushi. "He has a vision about alliances," says Chen of Siebel. "He's not just building a company, he's building an industry. He knows you've got to work well with others to create a symbiotic web of relationships so everybody can make money."

Now Siebel is looking beyond the walls of Siebel Systems and creating a new company, called sales.com. It's a Web site for the world's 40 million sales people -- complete with information about how to do their jobs better, community forums, and a free customer relationship management service. Originally, sales.com was organized as an adjunct to Siebel Systems, but the CEO recently decided to spin it off. This time he invited venture capitalists to invest. Why spin it off? Siebel says it all gets back to culture. The new company will have to create its own identity if it is to succeed. "The potential for this company is enormous, and I didn't want it to be limited by our management," he says.

If the new managers of sales.com are smart, though, they'll hold on tight to some of Siebel's values -- like the obsession with customers that has made Siebel one of the new stars of the software industry.

Hamm covers the software industry for Business Week in New York.


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Tom Siebel
Tom Siebel: CEO of Siebel Systems


WEB POINTERS
Click here to visit some of the sites mentioned in the story:
Siebel Systems
sales.com
Vantive
Clarify
BroadVision
Oracle
SAP
Prognostics



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