What’s in Store for Siebel?: An Interview With Bruce Cleveland

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When Oracle Corp. announced in September 2005 that it would be continuing its acquisition spree with a big plum, Siebel Systems Inc., industry watchers contemplated what it would mean for CRM customers and the industry landscape. Bruce Cleveland, Siebel senior vice president and general manager, Products, took time for an

Inside Scoop

chat with CRMGuru.com founder Bob Thompson on Siebel’s beginnings and its future under the Oracle umbrella.

This interview, which took place Nov. 3, 2005, was edited for clarity.


Bob Thompson


I’m very pleased to introduce Bruce Cleveland, senior vice president and general manager for Products at Siebel Systems. We’re going to be talking about Siebel Systems and what the future might bring. As most people know, Siebel is on a path to be acquired by Oracle in January 2006.

Bruce, welcome to Inside Scoop. We’re glad to have you.


Bruce Cleveland


Thanks, Bob.


Bob Thompson


Bruce, please lead off by telling us about your background and your current job at Siebel Systems.


Bruce Cleveland


Sure, I’d be happy to do that. I’ve been in this industry for a little more than 25 years. I started out on the technical side, working for companies like AT&T, Oracle and Apple. I joined Siebel Systems in 1996. I’ve held a variety of different jobs here, heading up alliances, marketing, the on-demand division and, now, the products division. That current responsibility is basically overseeing all the product management for our vertical offerings, horizontal offerings and platform technologies and the go-to-market strategies that accompany them.


Bob Thompson


So you’ve been involved with Siebel since the early days?


Bruce Cleveland


Yeah. I think I was definitely well below the 100 mark before we IPO’d.


Bob Thompson


I’d like to do a little time travel, if we could, and just go back to those early days. I came into the industry in 1998, and Siebel Systems was well on its way to being a real power in the industry at that point. But you saw the company go through an awful lot of change from being basically a start-up to being the dominant player, then having some struggles and then coming back and so forth. Can you give us an insider’s perspective on what that was like over those, oh, what was it now? Twelve years or so?


Bruce Cleveland


I think you go through various stages of key issues that need to be solved as you build a company. In the early days, it was about solving a set of computer science problems that had prevented things like Sales Force Automation from really being effective and coming at it from a different point of view than our competitors. I think, in those days, there might have been 400 or 500 companies€”small ones€”which produced Sales Force Automation technology. Tom Siebel’s vision was that if we could apply computer science to solving some of the more complicated issues around Sales Force Automation and then deliver them in a way that a sales organization would adopt, we might be successful. So that’s what we focused on initially. Things like mobility that seem trivial today were relatively difficult to overcome then. How could you synchronize a laptop with a back-end server system? How could you support thousands of concurrent users?


Bob Thompson


This mobility thing … you felt like this was a differentiator, from a product point of view at the time?


Bruce Cleveland


At the time, yeah. No one had really solved that problem. Intellisync had some capabilities where you could upload and download files, for example. But we have to remember that today is a far cry from then. The network’s performance in those times was still a dial-up. So those created complications.


Bob Thompson


How times change, huh?


Bruce Cleveland


Yes, they do.


Bob Thompson


You were starting to talk about another issue that was on the top of my mind, which is this notion that Sales Force Automation and CRM technology were something that big companies really ought to get behind. There wasn’t, in the early days, a brand that was viewed as, for lack of a better term, “the IBM of the CRM industry.” It’s always been my impression that Tom Siebel and the company were set out to establish Siebel as that brand. Was that actually a strategy at that point? Aside from the product? Because there was a lot of product on the market, and some of it was very, very good. Wasn’t it more than just a product game plan, even in the early days?


Bruce Cleveland


Yeah, I think that the vision was always to be a multibillion-dollar software company, and we considered what constraining points would prevent that. I think you could see in the technology, the marketing and the sales approach we put together that it was always designed around that. We marketed ourselves as a far bigger company than we were at the time. We approached our customers with the appearance of a much larger company than we really were. And we associated ourselves€”we borrowed the brands of others. In Tom’s words, “We stood on the shoulders of giants.”


Bob Thompson


Anderson Consulting, to be specific, right?


Bruce Cleveland


Exactly. And then we propagated that with IBM and other key integrators and large hardware providers.


Hindsight


Bob Thompson


I want to get on to some of the more current topics, but just one last question about the historical view. If there was something that you could do over again or if you were advising Tom Siebel and you could rewrite history to come up with a different ending than what we’ve seen, what would you suggest?


Bruce Cleveland


We adopted a strategy of using integrators for delivery, which was quite good, in that we knew that was a constraint on growth. But we also then, I think€”not intentionally but relatively unintentionally€”we abdicated the responsibility for seeing the ultimate success of our customers.


Bob Thompson


Maybe too much of a gap between you and the customers?


Bruce Cleveland


Yeah, I’d say that€”again, not intentionally. I think that we thought our S.I. [system integration] partners knew a lot more about being able to configure and deliver this than we did. And I think they would agree with this statement, as well, that it was a learning experience on our side and their side, as well as the customers’. I think if we were closer to that, we would have avoided some of the issues that we’re currently contending with.


Bob Thompson


Anything else that comes to mind?


Bruce Cleveland


I think that’s it. Of all the things that we could have done differently, I think that would be the one thing that we would have changed.


Bob Thompson


I want to talk about a couple of big topics. One is the integrated product line. I realize that Oracle has not officially acquired Siebel, so do the best you can with these questions. But there certainly are some questions about how Oracle’s going to pull off this converged product line. Then the other big topic that I want to get into is on-demand.

Let’s talk about Oracle and this converged product line. At least conceptually, it seems to me like a daunting undertaking. You take product lines that have been acquired from JD Edwards, PeopleSoft, Oracle’s own E-Business solution, Siebel’s product line, which is absolutely mammoth, and you’re going to come up with, in some timeframe, one product line. What’s your take on that?


Bruce Cleveland


Well, I can’t speak, specifically, to Oracle’s plans, but let me see if I can answer the question from a different perspective and see if we get there from here. The way I look at it is that we are embarking on this next-generation architecture. We’ve done these multiple transformations through the years through mainframe to mini computer to PC, client/server, web. I think we know the skin transformations that we’ve gone through.


Bob Thompson


And Siebel’s gone from client/server, which was your original implementation, to a full web-based approach, correct?


Bruce Cleveland


That’s correct. And I think this next generation of applications is really going to all be built on top of a service-oriented architecture. The benefit, of course, is multifold in a lot of different ways. There are benefits for customers because it’s easier to find programmers who can program in those environments, because they’ll get turned out of schools that way. It’s easier for the application vendors because they don’t have to build the infrastructure€”the interstitial glue€”that allows these applications to talk to each other. It comes from the infrastructure, from companies like Microsoft and IBM. So there are benefits there.

Therefore, the R&D investments that a manufacturer like us has to make is really just in value-added software, not in making it all kind of stick together. Of course, in integration through mergers and acquisitions, etc., companies€”as well as vendors€”benefit, because making these things work together is a lot easier. So from my perspective and from our perspective, we were going through this metamorphosis right now, which was moving off of our C++ stack for all of our application development to this new next-generation, service-oriented architecture stack.


Bob Thompson


So SOA is kind of the more flexible building block of modern applications, as I understand it, and you were going down one path to implement SOA. Correct?


Bruce Cleveland


That’s correct.


Bob Thompson


Siebel’s version of that was called Nexus, is that right?


Bruce Cleveland


That’s our internal project name. The commercial name was Siebel Component Assembly.


Bob Thompson


You announced that at your Siebel conference, I believe.


Bruce Cleveland


That’s correct.


Bob Thompson


And then Oracle had a different approach. But the common denominator, is it still SOA?


Bruce Cleveland


That’s right and that’s to my point. So we have to ensure that our customers, who are using our existing architecture, can also€”if they move to this new architecture€”still preserve the majority of investment that they’ve made in this existing stack. So let me answer the question from that perspective, because I think it’s somewhat analogous to what Oracle’s going to be doing.

My view is that we need to be able to ensure our customers can take all the investment they’ve made to date and then take this next-generation architecture and allow it to consume a lot of the engines and functionality that they’ve already instantiated in their companies. To do that, these service-oriented architectures, whether they’re C++ or COBOL, for that matter, allow you to wrapper those existing technologies with web services. And then those web services, because they accept certain inputs and make certain outputs, enable you to be able to mix and match these different€”


Bob Thompson


You’re saying you don’t have to start over. You can take some functions forward and wrapper them with these web services standards that are in the market now?


Bruce Cleveland


That’s correct. We announced that at our Customer World event a few weeks ago. We talked about how our existing stack would interoperate with our next-generation stack and went into quite a bit of detail into the roadmap there. I think that that is fairly akin to what I hear through [Oracle President] Charles Phillips and through the public announcements from Oracle, that they’re going to need to support the existing architecture with existing customers. But then they’re also going to build a next-generation set of applications. And those next-gen apps. are going to work on top of a service-oriented architecture. And because it’s standards-based, the interoperability between these applications becomes a lot easier.


Bob Thompson


The acquisition of Siebel by Oracle will happen in January?


Bruce Cleveland


I don’t know when.


Bob Thompson


Is that the published date?


Bruce Cleveland


There isn’t a published date. We’re working as rapidly as we can with the Justice Department and the EU to go through the proper hurdles.


Timetable


Bob Thompson


What I’m getting at is the real work of rationalizing all these product lines and fitting them into an SOA-type direction is going to start when the acquisition is actually completed, correct? So we’re looking at early next year potentially. Maybe you could just share briefly with our members how much time and effort we are talking about. You have an approach. Oracle has one. And you’ve got a lot of function and build this new sort of plan. Are we looking at having something available in a year? Five years?


Bruce Cleveland


Again, I can’t speak, specifically, to Oracle’s plans and their dates. I can just tell you generically and generally what I believe to be true, which would be true whether we were an independent company or not. And that is: We would need to support an upgrade path. The beautiful part about these next-gen, SOA-based applications is that they allow you to completely support what was built in a prior generation through these web services.

The great part of the plan is that you don’t have to throw everything out. You don’t have to wait for all this next-gen stuff: 1) You can continue to use what you’re using. And 2) when it becomes available, it can interoperate and mix and match within an environment. So it’s up to the end-user to decide when they want to make these changes.


Bob Thompson


So there’ll be a path out over, probably, a period of years to get to this new converged type of product line.


Bruce Cleveland


I suspect that will be the case. I know it would be the case with Siebel Systems, as an independent company.


Competitive differentiation


Bob Thompson


One last question on the large enterprise market. We have found in our research that there are pros and cons of different vendor solutions. And Siebel’s been noted as having a very strong product; the best of the industry in our research and analyst reports, but having some problems in other areas.

But when you sort it all out, there are very narrow differences in the total package: the product, the service, the support, the pricing, everything. It seems like it’s going to boil down to SAP or the Oracle-Siebel combined package. Now, I realize you can’t speak for Oracle. But as somebody who’s been in the industry as long as you have, what’s really going to determine whether people pick SAP or go some other direction?


Bruce Cleveland


I think it’s a great question, Bob. I think this is kind of where the rubber meets the road. The fact is, I think the differentiating factors are going to be around the main expertise. I think that we have demonstrated expertise in areas such as sales, marketing, customer service and support, incentive compensation. These are all the front-office side. And by the way, we all know that adoption rates€”usage rates€”are critical in what I would call ad hoc participation software technology environments.


Bob Thompson


Which is not enforced like it might be in a back office or a shop floor.


Bruce Cleveland


Exactly. I mean, you cannot tell a sales rep to use your technology.


Bob Thompson


Well, you can tell them!

[Laughter]


Bruce Cleveland


You can tell them, but that’s not good. If he or she is your top-producer, the likelihood of you enforcing that is absolutely low. I think that is one big, critical differentiator. So as the competitive environment moves to the front office, it’s really going to be around the question, “How well can your software really make an end-user more productive?” Because the more productive they can be, the more successful they can be, then the more they’ll use your software by default. You don’t have to legislate it. That’s a brand-new environment for a company like SAP to have to perform in. I don’t think that they have the skills there. They don’t have the domain knowledge.


Bob Thompson


And aren’t there differences in the industry affiliation or concentration? If you look at Oracle and Siebel and PeopleSoft vs. SAP, there does seem to be some industry lines being drawn in the dirt, with SAP obviously having a very strong base in manufacturing. But service industries, financial services, high-tech, as well€”not quite the same. So when you said “domain expertise,” I was thinking you were going to get more into the vertical side of it, as opposed to just functionality.


Bruce Cleveland


Well, that was going to be the second part.


Bob Thompson


Oh, I’m sorry. I jumped ahead.

[Laughter]


Bruce Cleveland


You’re going exactly where I was going. The second part of that is, not only from a functionality point of view but in our particular space, there’s no such thing, really, as a horizontal CRM solution. You can offer one. We used to 10 years ago, but that quickly migrated into vertical-specific offerings, because customers didn’t want to pay for themselves to modify the data model and the scheme to support their industry. They expected us to walk in with that knowledge and understanding of their business. So that’s not true on the manufacturing side. You don’t have to have vertical instantiations of your product. And we can dig into the nitty-gritty. Even at the higher level, the ability to have a conversation with the vice president of sales or V.P. of marketing or the buy industry is a very important skill-set that we’ve built up in organizations.

That’s one piece. It can go all the way down to the data model. If you don’t have a data model that you can extend through metadata, then the problem becomes that you can’t upgrade your customers; you can’t create industry-specific versions of your software. So if you, for example, allow your customers to modify the actual programming logic and code down through the application code, itself€”but also then all the way down to the data model€”if you don’t do that through a meta data approach, you can’t upgrade your customers. You can’t move to new industries. It just becomes this behemoth of code that is virtually impossible to upgrade.

And I think that’s a big, big differentiator. It’s, I think, one of our biggest technical competitive differentiators.


On-demand CRM


Bob Thompson


While we’ve been talking about the large enterprise game and the battle that will, certainly, keep raging over the next few years. But there’s another battle that’s being fought, and that’s in the on-demand space.

How prevalent will on-demand become? Because the proponents of this approach say that it will become dominant. Maybe in excess of 50 percent of software will be delivered as a service. Do you believe that’s going to happen?


Bruce Cleveland


My statement would be predicated upon which market we’re talking about. And the two different markets I would look at€”the way I would divide it€”is the enterprise and small and medium business. I think in the enterprise it will become a part of the arsenal that IT will look at or the businesses will use. But it will not be, in my view, the only way in which they consume this. And I’m not even sure I would declare it to be the predominant way, just because of the cost of capital. There are other things that large companies can bring to bear that make an on-premise version financially more attractive to them. Now, compare and contrast that against a small and medium business market space. Their lack of IT resources. Lack of infrastructure. The cost of capital is different for them. For a variety of reasons, on-demand, I believe, will be a predominant way in which technology€”application technology, certainly€”will be consumed.


Bob Thompson


It’s interesting, because it seems like salesforce.com and RightNow are targeting larger enterprises, and their messaging is around the adoption in bigger companies. And of course, they’re growing quite fast over the last couple of years. And you’re saying you think that there will be some obstacles to their penetration€”or that of companies like them€”into the large-enterprise space. Is that right?


Bruce Cleveland


Yes, I think if you were able to see who they’re really selling to, it differs from what the marketing voice is. While I think that they covet enterprise and they, certainly, have won some notable opportunities in the enterprise space, the reality is that most of those are fairly limited, in terms of roll-out. If you talk to any industry analyst, you’ll find out that the claims may be they have 2,000 or 5,000 users. If you really go and talk to the customer, you’ll find out that it’s hard for analysts to find anybody with more than several hundred€”200, 300, 400€”that have been actually rolled out. So there’s a difference in the marketing noise vs. the reality.

The second part is that when you enter the enterprise space, this is still computer science. I mean, whether you consume this in an on-demand format or you consume it as an on-premise format, there are simple basic laws of physics that have to be adhered to, things like large reports that have to span large sets of data, where you need to generate quick SQL statements that come back. There needs to be tuning.

So a multi-tenant environment, which is typically how most of these on-demand delivery vehicles are presented, is more difficult to support in these larger instantiations. Not impossible but more difficult. Because it does require tuning of the data, tuning of the reports, tuning of the SQL statements in order to ensure that these larger customers get the right type of performance that they expect. So it’s not like a CRM spreadsheet, which is kind of how it’s being positioned. It’s really, still, a large-enterprise project. The customers seem to worry about that.


Bob Thompson


The jury is still out on how far on-demand CRM is going to go. What I’ve been hearing from analysts that maybe 10 percent to 20 percent adoption as a total market. It’s certainly interesting to see how it’s progressed from being just kind of an idea five years ago that looked like it might not go anywhere.

We certainly, saw a lot of ASPs flame out that weren’t well thought out. Now it’s definitely for real. With that in mind, can you give us a quick update on Siebel’s on-demand strategy, which, as I understand it, is very much targeted at SMBs?


Bruce Cleveland


Actually, we started our OnDemand group targeted purely for SMBs, and we quickly realized that there is strong demand in the enterprise space. So we have had roughly equal uptake between those two different markets. And we’ve grown year over year€”well over 200 percent. We announced recently at our earnings conference call that our OnDemand installed base exceeds 44,000 subscribers. Our win rates against salesforce.com have continued to climb. We’re now at 59 percent as of last quarter. You can imagine, since we use our own products, we know these things pretty well. We’ve delivered four or five releases over the last 12 months, and so, if there were functionality gaps in certain areas, we certainly closed them, and we certainly added a lot of great functionality in others.

So we’re seeing both in our SMB market and our enterprise-market targets that we’re getting very good traction. If I have an area where I’d like to see us do better, that is I’d like to increase our market presence in the small and medium business market space. We started that about a year ago. So we’ve grown. We’ve grown rapidly. But that wasn’t a market that we really participated in before, and I’d like to accelerate that, given the success that we’re having.


Bob Thompson


Final question. Can you take a look out over the next five years? When you look at the growth€”and again, I realize you can’t comment on Oracle’s plans for obvious reasons€”more generically, what do you think are going to be the key issues that any of the players in the industry€”in the large enterprise segment, specifically€”have to overcome to have the industry continue to grow and be viewed as a successful type of technology to help manage customer relationships more effectively?


Bruce Cleveland


I think it’s a great question. There are really three things that I think need to be done€”and done very, very well€”in order for CRM to really pay off, whether it’s consumed in an on-demand factor or an on-premise form factor. The first is user interface. I think that we need to make dramatic strides in providing a user environment that is role-based. That is, depending upon whether you are a sales rep or a vice president of sales or a CEO, you can’t present a one-size-fits-all UI. It has to morph for that position. Some positions are data-based. That is, you put a lot of information in; you’re a call center agent. Some positions, you are an information consumer; you pull a lot of information out. So that’s one area that has to change dramatically.

The second area is data quality and data federation through uniform customer master, where if you don’t have great data€”if you don’t have one way to kind of look at the customer and have that federated out to all your systems€”it’s really tough to get a lot of the benefit that you want from out of these different applications. The third thing that needs to be done is to embed analytics in every application area, so that way, the systems that have been put in place are really kind of the nervous system. The brain is going to be the analytics, and that gives you useful information that you can do something with. So I think those are the three areas that you’re going to see dramatically shift the uptake of CRM.


Bob Thompson


Bruce, thank you very much for sharing your thoughts about Siebel and about the market in general, on Inside Scoop.

Bruce Cleveland
Siebel Systems
Bruce Cleveland, Siebel Systems senior vice president and general manager for Products, is focused on ensuring that Siebel Systems maintains and extends its product leadership in customer-facing solutions. Cleveland has more than 25 years of industry experience, including senior technical and marketing management positions at AT&T, Oracle and Apple Computer.

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