Can Mike Lawrie make Siebel better?

In many ways, Mike Lawrie seems to be just the sort of guy software maker Siebel Systems needs to lift it out of its dark days.

It's true that he doesn't exactly ooze charisma and intensity. He doesn't court controversy or come off as a grand technology visionary. But the 26-year IBM veteran--who was tapped in May to run the troubled company after founder and chairman Tom Siebel stepped aside--may have qualities better suited to the task than did his predecessor.

During his first public appearance as Siebel Systems' chief executive at the company's annual convention this week, Lawrie exuded a calm and steady manner as he talked about a renewed focus on customer satisfaction and new business opportunities. He also struck a conciliatory chord, acknowledging the company's strained relations with many clients.

Siebel was once one of the largest and most prosperous software companies in the world. But in the post-bubble era, Siebel's financial fortunes have suffered, and its once-lofty stock price has plummeted. The company faces lawsuits from angry shareholders and fines from the U.S. Securities and Exchange Commission for breaking fair-disclosure rules. At one point, Tom Siebel even offered to sell his company to Oracle.

The time was ripe for change in May, when Lawrie stepped in. He still has a lot to work with. Siebel is still considered one of the top players in enterprise software, with $1.35 billion in revenue last year and more than $2 billion in cash. And in a promising omen for Lawrie, the company announced that it would beat earnings projections for the third quarter--the first full earnings period under his management.

Lawrie sat down with CNET News.com to offer his take on Siebel's problems, what a turnaround will take and what's wrong with the Larry Ellison school of management.

Q: It looks as if Siebel's going to beat earnings projections for the third quarter. Is this a sign that the company's turning a corner?
A: I don't know. I would say this is one data point. This is one step. But one data point and one step is not a trend. Ask me a year from now, and I will tell you what this was. But I don't know what it is today.

Is it true that Tom Siebel approached (Oracle CEO) Larry Ellison about selling Siebel to him?
I don't know. You'd have to ask Tom about that.

But surely you've talked to Tom about it.
No, I really haven't talked to him. My view is it really doesn't much matter what was discussed a year ago or two years ago or three years ago. My focus has been on where we are today and where we're going as a company.

Obviously, Oracle is tied up now with other matters, but do you think it's a bad idea for Siebel to merge with a bigger software company, like an SAP or an Oracle?
I don't know if it's a bad idea or a good idea. Every publicly traded company is for sale every day. We had 18 million shares of our stock change hands today. So we're for sale every day of the week. What's important is the value that that brings to our shareholders, and if it makes sense from a shareholder value standpoint--and only then as a leader of a public company. You have to look at all those alternatives.

It seems to me that you're forgoing an extreme makeover on Siebel in favor of making a few tweaks. Would you agree?
Actually, in many ways, it's just the opposite. As a CEO, you have about five or six levers that you can pull, one of which is strategy. We're making significant changes in strategy. The value proposition is completely changing. How we partner is completely changing. Markets that we go after are changing.

We're going after China, and we're going after Japan, the Far East and Eastern Europe. Moving into the software business as a subscription service is a huge change. We're the only major applications software company doing that. Moving into the custom-software arena is a huge strategic change. Building up our services business is a huge change. So from a strategy standpoint, it is significantly different.

Another lever you have as a CEO is the financial model. We've moved this financial model much more toward predictable earnings growth and profitability, as opposed to just revenue. We've invested in the field customer-facing resources and reduced overhead, particularly at the corporate level--a huge change. We're bringing in a new leadership team at the senior level, reporting to me. That's a 40 percent change in the leadership team in six months.

Isn't it ironic that Siebel has a problem with customer satisfaction, given that your technology is supposed to solve this kind of problem?
No, I don't think so at all. Go ask SAP customers about their implementations; you'll find the exact same feedback. The difference here is that we want to do something about it, because we think it's a competitive advantage. If we can make those implementations more successful and really drive business outcomes much more quickly, we think that's a competitive advantage.

Why do you think customer satisfaction has been so off-the-mark with customer relationship management programs in particular?
I don't think this is anything different than ERP (enterprise resource management) or human resource applications. Two, I think a lot of the front-office or front-end systems are much different. They're very dynamic. They're decentralized. Many of the back-end systems are very centralized, very static.

You are now dealing with portions of the employee population that have very different, nonlinear tasks that they do. So it becomes a much more difficult integration project, and in many ways, re-engineering the front office is what helps companies transform their cultures. And transforming cultures is probably the most difficult task you can take on.

Those that are successful have a disproportionate share of benefits because it is a huge competitive differentiator. So it's the same old story. If you put in the time, you put in the effort, you do the work and do the planning, you get the results. If you don't do the aforementioned, you get less-than-outstanding results. Where we're refocusing the company on is how we can get more and more of our customers to get those outstanding results.

You mentioned corporate culture. How is that so difficult to change? Siebel's corporate culture is legendary for being very cutthroat and political. Do you think the Larry Ellison school of management--from which Tom Siebel, Marc Benioff and Craig Conway have all graduated--is an effective one?
I don't know. I think certain cultures are right for certain times. But I think times change, and when they do, cultures need to change. That was my experience when I worked for IBM. Our culture changed many times based on the requirements of our customers.

What I do think is a mistake is to think that one culture will constantly fit an ever-changing set of market dynamics and customer requirements. You need to be attuned to what customers require and then make sure you're adjusting your strategy, your culture and all the things we talked about to make sure that you can better serve those customers. And those things do change.

Almost every aspect of how you go about transforming an institution needs to be addressed at Siebel Systems.

How do you think Siebel's corporate culture needs to change?
I think we have to be more focused on the long-term relationship with our customers. I think we have to be balanced between our transaction focus, which is a good focus, and the longer-term solution focus. I think we have to be focused on assuring our customers and our partners that we deliver the business outcome for which our customers are looking. Those are very significant cultural changes.

You're talking about putting a greater emphasis on services. Do you envision a sort of mini-IBM Global Services at Siebel--a Siebel Global Services, if you will?
No. Siebel is first and foremost a software technology company and will remain a software technology company. But I think services is a very, very important part of the going-forward value proposition, and you have to be willing to invest in that to ensure that your customers are getting the business outcome they're looking for.

I don't think it's a simple as, "Gee, I want a services business" or "I want this" or "I want that." What we want is for customers to be successful and to be able to get a significant return from the investment they've made. That's the mission. Then you work backward, and you say, "OK, if that's what we want, what do we need to deliver that?"

You say that Siebel CRM OnDemand, your subscription software unit, is a top priority for the company. Are there any limitations to that model?
There are limitations to every model. There is not one thing that fits every customer. What is clear is that there is a market for those who want to buy software more as a service--who do not want to invest in the infrastructure and the skilled people to support that infrastructure.

We think that if we're going to continue to be the leader in this space, we need to offer all those alternatives. I don't believe in sticking with one thing just because that's what you've been doing for 10 years. There's no reason why you can't walk and chew gum at the same time. These are not mutually exclusive.

I couldn't help but notice that on the slides, you used in your keynote that OnDemand was in a smaller bubble than the bubbles representing business units, including traditionally packaged software and custom-developed software. Are there some situations where subscription software doesn't make sense?
It doesn't make sense wherever a customer wants to maintain and control their own infrastructure. There are countries that don't want data about customers to go beyond a country's borders. There's a whole host of reasons why some customers don't want to do that.

There are cultural differences. In Japan, there's a great emphasis on building your own software. That's considered a strategic imperative in those cultures. So you don't go into those cultures and say, "Well, that's interesting, but here's what I think you should do."

Right now, software as a service is a small portion of the overall market. The custom market is by far the biggest market. Siebel has traditionally been positioned in packaged applications, and we're going to broaden and go out and participate in the entire market.

Do you see your job here as leading a turnaround, and have you ever done one before?
I've spent most of my career doing turnarounds at IBM. That's what I've done and, yes, that's exactly what I signed up to do here.

Will this be the most challenging turnaround you've ever been tasked with?
I think the scope of this is significant. From a scale standpoint, it's smaller. But the scope of it is bigger, because it involves all the things we just talked about. Almost every aspect of how you go about transforming an institution needs to be addressed at Siebel Systems.

It's not just one little thing or tweak. It really is all aspects of it. That's what I found challenging. I knew this before I got here. It was no surprise. That's what attracted me to this opportunity--the ability to reshape Siebel Systems and to capitalize on what I think is a pretty significant market opportunity.