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E.piphany CEO tells all
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April 10, 2001: 3:49 p.m. ET
He leads his young software firm into battle against Oracle and Siebel Systems
By Kim Cross
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NEW YORK (CNNfn) - It is 5:30 a.m. on a rainy January day and E.piphany CEO Roger Siboni is getting fired up in the back seat of a Lincoln Town Car. The stock market opens in an hour. On his way to live TV interviews, he is bracing himself for Wall Street's reaction to his company's fourth-quarter earnings. As the car whizzes through San Francisco's slick city streets, his investor relations and public relations directors are twisted around in their seats, grilling him with mock press questions. Unfazed, Siboni articulates in raspy sound bites as he nurses his second cup of coffee.
It has been a good year for E.piphany (EPNY: Research, Estimates), and not many companies can make that claim. Siboni's company creates software that helps businesses interact with customers, and it has seen sales increase more than fivefold in 2000, to $127.3 million. By the end of the year, its fourth-quarter loss was down to 8 cents per share, beating analysts' targets. And the company landed more than 250 new customers, most of them big, "old economy" stalwarts. E.piphany counts as clients about 20 percent of the top 100 U.S. companies.
Minutes later, Siboni delivers that news on camera. E.piphany, he says, is "right on track" to be profitable by the end of the year, and he expects to grow revenue by 100 percent. Wall Street smiles. Analysts gush congratulations, and the stock ticks up 6 percent to $38.4, rebounding from a low of $25.75 earlier in the month. "We're not a startup anymore," he says later. "We're a grownup."
Not just yet. Though E.piphany has made a name for itself by pulling ahead of scores of companies that just a few months ago crowded the $9 billion market for customer relationship management (CRM) software, Siboni has a daunting task ahead if he intends to live up to his promises. He will have to beat out database software titan Oracle (ORCL: Research, Estimates) and others to reach his goal of becoming No. 2 in CRM. Tougher still, he must take on industry leader Siebel Systems (SEBL: Research, Estimates), a colossus sporting a $26 billion market capitalization.
Leading a 4-year-old company into battle against Siebel and Oracle is a pretty tall order. What's more, the charge comes at a time when the long-term demand for -- and the bottom-line benefit of -- CRM software is still unproven. But thanks to a career spent climbing his way to the top and networking feverishly, many say Siboni is just the man for the job. "If I had to put my money with someone," says Jon Madonna, president of e-learning firm DigitalThink and former CEO and chairman of accounting firm KPMG, "it would be Roger Siboni."
No rookie
Not long after E.piphany was founded in 1996, founders Steve Blank, Ben Wegbreit, John McCaskey and Greg Walsh went in search of the right person to nurture their technology into the next great enterprise software company. So they called John Doerr, a partner in the venture capital firm Kleiner Perkins Caufield & Byers, whose connections in Silicon Valley are legend.
Doerr knew Siboni was the right candidate for the job. The difficult part would be persuading Siboni to leave his post as deputy chairman at KPMG, the Big Five firm where he spent 23 years building other companies. He shot up the corporate ranks there, working in the accounting, tax, finance, and mergers and acquisitions departments, until becoming at age 28 one of the youngest partners in the firm's history. Those years spent dissecting companies from every angle gave Siboni a deep understanding of how a business should run, which was exactly the quality the E.piphany founders were looking for in a CEO.
It took a lot of convincing. Several times in the past Siboni had said no when Doerr tried to persuade him to lead startups. "I turned him down at least a dozen times," Siboni recalls. In May 1998, after three months of one-sided negotiations, Siboni signed on with E.piphany. "To this day, I'm not sure why I said yes," he says. "I told my wife, I'm going to go upstairs and call them and say no. And somehow I said yes."
A wild ride
Nearly three years later, Siboni is settled into his office in San Mateo, Calif., a small, Spartan room with an immaculately paperless desk. "I'm a little obsessive-compulsive," he says with a shrug, as he straightens a few awards arranged on a table and then attempts to read and answer every email. The sole wall decor is a poster-size plaque bearing the company's 10 core values (see "E.piphany's Secret Sauce,"). It's a far cry from the plush Park Avenue offices of KPMG, but Siboni hasn't looked back. "I certainly don't regret it," he says.
It's easy to see why he doesn't. Life at E.piphany has been a wild ride, full of "irrational exuberance and moments of despair," he says. The company pulled off a high-flying initial public offering in 1999, raising $71 million. In January 2000, a very timely secondary public offering pumped in another $339 million in cash, more than enough to survive the imminent April crash.
Like other CEOs, Siboni is focusing on turning a profit, and that means acquiring more customers while containing costs. He has created strict internal buying procedures to shrink procurement costs. He says he will continue to forgo the expensive marketing blitzes that came back to bite most dot.coms last year. He will rely instead on customer recommendations and industry buzz to attract new customers. That method worked last year, when E.piphany spent about $400,000 on targeted advertising campaigns while other firms burned millions.
Siboni's mantra: Small office, big house. "If we watch our pennies, our dollars will take care of themselves," he tells his staff, urging them to spend wisely in consideration of the bottom line. No hypocrite, he winces at his morning ride in the Lincoln Town Car, hired for the purpose of this interview. He cringes at the "unnecessary" expense of the hot buffet at E.piphany's quarterly town hall meeting, where he rallies more than 300 employees. "We have to become profitable by year-end. We absolutely have to!" And well-heeled though he may be, with nearly a $40.5 million stake in E.piphany, Siboni has his shoes re-soled.
Ecosystem of data
Siboni describes E.piphany's technology as an ecosystem of data about customers. The software culls information from all the "touch points" where companies interact with customers, from call centers, Websites, e-mail, or Web chat. The idea is that if companies can better understand customers, they can better serve them by providing individually tailored offers or promotions and more insightful customer service. (Imagine a call center rep who knows you bought snow skis last year at a physical branch, that you searched for poles on the Website last week, and offers you one promotion -- a sale on ski racks -- when you call.) Initially focused on analytics, which help make sense of customer data, the company added call center software through its $2.7 billion acquisition of Octane Software, and personalization tools through a purchase of RightPoint for $400 million.
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 ROGER SIBONI
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Title: CEO, E.piphany
Age: 47
Home: San Francisco
Status: Married, three daughters
Résumé: Former deputy chairman, KPMG
Hobbies: Avid collector of colonial currency
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Though E.piphany's technology is designed for the Web, it is not intended only for dot.coms. In fact, E.piphany has gone after the top 100 companies right from the start. Procter & Gamble, DaimlerChrysler (DCX: Research, Estimates), American Airlines and Wells Fargo rank among the company's 330 customers, who average an initial deal size of $800,000.
"We knew where the money was," Siboni says. When he did bother with dot.coms and technology companies, he went after the big dogs: Amazon.com (AMZN: Research, Estimates), Cisco Systems (CSCO: Research, Estimates), Microsoft (MSFT: Research, Estimates), Hewlett-Packard (HWP: Research, Estimates), and other blue chips.
E.piphany's technology helps customers such as Nissan North America analyze Web surfers' clickstreams. Clickstream analysis highlights users most likely to make purchases and provides information Nissan marketers need to create targeted campaigns. E.piphany's software also helps produce sales leads for Nissan's Infiniti dealers, who can access the data from wireless devices at 150 dealerships across the country.
Nissan saw sales rates jump to as high as 64 percent after campaigns and generated thousands of incremental sales, an astonishing return on investment of 1,900 percent on the cost of each campaign. "The first two major campaigns more than paid for the cost of the software and implementation," says Ted Ross, former corporate manager of CRM at Nissan North America, who is now vice president of automotive CRM solutions at i-loft. "We generated millions on a campaign."
Connections, connections
At KPMG, Siboni established many key relationships both inside the firm and at client companies. These relationships make up the web that links nearly every customer, executive and partner to E.piphany. "It's the power of the Rolodex," says Karen Richardson, E.piphany's general manager for North America. She left her post as head of sales for Netscape Communications to join E.piphany. "I wouldn't have come if I hadn't known who the CEO was," she says.
Siboni's kieretsu in Silicon Valley has cemented his status as a go-to guy. KPMG partners approach him for business advice. He sits on the boards of directors of several companies, as well as the University of California at Berkeley's Haas School of Business. And when he asks for help, folks tend to respond. One day in January he called the CFO of J.C. Penney and left a message asking for a favor. Though they hadn't spoken in five years, Donald McKay -- on the day of his retirement -- returned Siboni's call in a matter of minutes.
Some of Siboni's relationships have turned from collegial to competitive, but he still tends them with cautious respect. He remembers a time at KPMG when he consulted with Pehong Chen and Tom Siebel on a company called Gain Technology. When they sold the company, he helped each of them build new ventures that eventually became BroadVision and Siebel. To this day, Siboni considers Chen a friend and Siebel a worthy nemesis.
Tough road ahead
That nemesis is perhaps the biggest challenge Siboni will face in the coming year, bigger even than expectations on Wall Street and a market unsure of the value of CRM, says Charles Phillips, a managing director for Morgan Stanley Dean Witter (MWD: Research, Estimates). Though Siebel's forte is in sales-force automation and software for call centers, a much broader scope than E.piphany's, Siebel, which has $1.8 billion in sales, has a serious lead in the CRM market. "We spend more money developing our product than E.piphany and [other competitor] Kana Communications make in combined revenues," says Andrew Zoldan, vice president of Internet applications for Siebel.
Siebel is so far ahead in market share that purchasing its products is "viewed as a safe decision, like [buying from] Microsoft," says Bob Chatham, a principal analyst for Forrester Research (FORR: Research, Estimates). And Siebel knows it. For the most part, Siboni says, "Siebel won't even acknowledge us as a competitor."
Not so with Oracle, another big player in the market. CEO Larry Ellison has spotted E.piphany gaining ground, and he does not like it. In a speech at a trade show last year, he bluntly stated his plans to put E.piphany, among others, out of business. Other competitors include PeopleSoft (PSFT: Research, Estimates), through an acquisition of Vantive, and Nortel Networks (NT: Research, Estimates), which bought Clarify.
Siboni takes Siebel's snubs and Oracle's trash talk as backhanded compliments. "Everybody needs an enemy," he says. And he plans to take those enemies head-on. Some analysts say the next step for E.piphany is to add an application for sales-force automation. That would mean stepping into Siebel's direct line of fire-and into its more than 60 percent of the market.
It won't be easy, says Forrester's Chatham. "There's no one that [E.piphany] could acquire that would give them enough enterprise-class salespeople to catch Siebel."
Siboni hints that he might have something else up his sleeve. "The world does not need another traditional [sales-force] application," he says. E.piphany's next move: creating a product "generations ahead" of what Siebel offers. It would give a salesperson access to vast amounts of customer and marketing data, all on a mobile device.
Small office, big house
After a 14-hour day at the office, having consumed nothing but coffee and diet root beer, Siboni plops down in the sitting room of his home in San Francisco's Presidio Heights neighborhood and sips fizzy water. His motto, "small office, big house" rings true -- it's a big house, in San Francisco terms, though lacking the opulence one might expect from a multimillionaire.
His wife Joan pours a glass of Chardonnay for their guests, DigitalThink's Madonna and his wife. Though he's sticking to water, Siboni mellows as he jokes with Madonna, who was Siboni's mentor at KPMG and who is now a close friend. The two recall comical stories of mutual colleagues and industry bigwigs. It soon becomes clear that the nexus of Siboni's life and business is the very thing his software aims to promote: "It's all about relationships."
E.piphany's Secret Sauce
Displayed in most rooms at E.piphany is a plaque inscribed with 10 core values that serve as the company's "moral compass." These values, reprinted here verbatim, are the key attributes of what E.piphany employees voted internally to be "the world's best companies." Employees are evaluated annually based on adherence to these values.
- Bold, consistent vision. Deliver a compelling, shared vision that passes the "elevator test" of simplicity-and is consistently communicated to the rest of the world.
- Focused. Understand our priorities, never get distracted, and systematically refresh our objectives.
- Customer satisfaction. Make each customer an E.piphany evangelist. Only agree to what we can deliver and always deliver what we agree to.
- Relentless. Always inspire ourselves, our coworkers, and our teams to a higher state of performance, speed, quality, completeness and, ultimately, competitiveness.
- Respectful. Be professional in every interaction with employees, customers, and vendors. Treat them with the utmost respect, honesty, directness, and always follow through.
- Extraordinary teamwork. Communicate with and count on everyone to play their part flawlessly, as you would expect them to count on you. Every person has a role on our team.
- Accountable. Be willing to reap the rewards or accept the consequences of our commitments.
- Intelligent. Out-think the competition. Constantly drive creative ideas. And work to bring the best ideas and practices to E.piphany.
- Open, honest communication. Speak your mind for both good and bad. Demand the same from everyone we work with. Insist that bad news travel faster than good news.
- Listen well, act quickly. Listen well, entertain the ideas of others (both inside and outside the company) and seek counsel. Then act decisively.
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