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CEO Spotlight: Michael Fields, KANA Software Inc.

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

A random twist of fate at a job interview steered Michael Fields into the technology industry where he would eventually find himself working for Larry Ellison at the helm of Oracle USA during a somewhat troubled time in the software giant’s history. Angel Mehta, Managing Director of Sterling-Hoffman, talks to Michael Fields, CEO of KANA Software, about letting market’s mature, and a ‘radical’ decision to move jobs from India back to the USA.

Angel Mehta: Was a career in the tech world part of the game plan for you at an early age?

Michael Fields: No. I got into it by accident as so many of us do. I wanted to be a draftsman and that’s what I started to go to college for. I interviewed to try and get a clerk job during the day, so I could do college at night, and the lady who gave me an aptitude test (we did tests in those days) said, ”You did very well on the logic side. Want to take a test for a job using an electronic accounting machine? It pays $58 a week, and the job you interviewed for only pays $52.” Well, that did it for me… I took the test, and got the job – six more dollars a week was great. And that’s how I got into technology. The Air Force recruited me to work on Burroughs Hardware because I had been working with ‘computers’ for a year and a half while going to college.

Angel Mehta: What prompted KANA to bring you in when it did?

Michael Fields: The CFO at KANA was someone who worked for me at Oracle when I was President of Oracle USA. He had called me a few months earlier, and asked me if I’d be interested in joining KANA’s Board of Directors. I did a little research and I said no. He kept pestering me. The external consultant of the firm, whom I had known for years, also suggested that I take a hard look at it. The analysts were saying great things about the company… and I spoke to a friend of mine who was at the time the CEO of Gartner, and he suggested that the company had great technology and a good customer base but suffered from some basic execution problems.

Ultimately, I agreed to join the board and at the first board meeting it came out that the CEO had some health problems. So two weeks later, they asked me to run the company. I initially agreed to take up the reins for a few months until we could find someone new. The first thing I noticed is that there were some great people here who had not been given a chance to do the things they could. There were so many areas available for tweaking that could help almost immediately. I chalked out a plan and offered it to the board… they liked it, and so I’m still here.

Angel Mehta: Do you view the CRM market -- which is a relatively established segment with established players -- as an area of growth or is it just a matter of your established vendors sustaining annual revenue (or taking it from each other)?

Michael Fields: The best comparison I can think of for the situation we’re in with e-services is the relational database market of the late ‘80s. It was part of an overall data management market and the perspective then was that data management was hard and cumbersome and cost you billions of dollars to implement and this was a piece of it. It was kind of nice enough but it would never really be a substantive growth area. So, if you look at what the analysts said then, it was going to grow eight percent or nine percent or ten percent a year. Well, we all know what happened. I’m not even talking about the dot.com era. Why did the exponential growth in the early ‘90s to the mid-‘90s occur?

I believe it resulted because of a few reasons. One major factor is that initially, the business value of relational database management wasn’t understood at the top of the company. Let me explain that situation in this way. You’ve got some executives who run the company by making decisions sitting in a room along with top management. IT managers, standing outside the door, had no role to play in the decision-making process. The company was driven by executives who would, from time to time, shout at IT managers to reduce costs. It wasn’t until information about how these technologies, built by IT managers, actually made them more competitive, helped them expand their markets, made it easier for them to reach their customers, adding to the bottom line of their business process, that you started to see CIOs in that room which helped turn this into a significant growth market.

Secondly, there were companies, like Oracle’s Sun, which helped drive the market dynamics on its feet. By bringing the relevant information back to the market enabling sales to increase manifold through vertical and horizontal spread like a viral infection, resulting in exponential growth of the companies.

Today, I see a lot of similarities between the e-service market and the relational database market. Let me explain that through my earlier metaphor. Let’s suppose the customer service director or vice-president is outside the room. Every once in a while, somebody opens the door, shouts at them, “Reduce cost by ten percent this year and increase productivity!” The value proposition is just beginning to come in the room. It’s only now that the executives at 02 are recognizing the fact that our technology has allowed them to move from call-center action to web self-service where the cost of a call is about $25 and a web self-service interaction is 50 cents. They’re moving 50,000 to 100,000 customers a quarter to web self-service because of our products.

eBay is recognizing how they can touch their customers; they do nearly 3 billion e-mails a year through the use of our technology. Sprint is recognizing that they have to answer a question with their customers in the first call. Doing that it improves their ability to cross-sell, up-sell that customer by 80 percent and the use of our knowledgebase technology allows them to do that.

So, as we quantify data, and our customers quantify their value benefits, I think it will result in exponential growth. The market is not saturated. It just takes time for people to realize the value of things and justify investing more heavily. I believe the market is poised for exponential growth.

Angel Mehta: What are some of the things you felt you would have to modify about the culture, strategy and the organization in general when they asked you to take over?

Michael Fields: At one time, when money was free, this company had a $9 billion market cap, and my guess is that everyone believed we were already a big company. In fact, we were still a small company. We had one year where we hit $100 million in revenue, and had never been profitable. But there was this attitude that we could do anything, spend on anything we wanted… we had 60,000 square feet of office space around the world and 150 people. That kind of thinking needed to be removed from the organization. We had four layers of management in R&D, five VPs of strategy but only four direct sales reps in the United States. None of them had fixed a target because there were no marketing campaigns focused around them. When you add up all of these things, it’s obvious you’re not going to get a whole lot done. We really had some good people who individually, and collectively to an extent, were focused on doing the right thing but the leadership wasn’t there.

Angel Mehta: You made sort of a buzz-inducing decision to relocate everyone back to the U.S. from overseas, which is a contrarian approach these days with development going to China and India. Are you hearing from other colleagues in the industry that outsourcing is not all it’s been hyped to be?

Michael Fields: I’m hearing that a lot more. I believe one hundred percent in globalization. I think outsourcing has its place and it should be used opportunistically. What this company did was to outsource the intellectual property and core product development. So the core products were being developed by people who didn’t work for the company. Now, if we were big enough to be able to have our own development center in India and the reasons for that made sense to the globalization effort, then that would have been different, but they weren’t. When you look at the ridiculous salary escalation and the turnover rates for outsourcing organizations… there is just no way you can be successful. We were just watching our intellectual capital disappear. So, when I initially made the decision to come back to the U.S., it was because we were giving up our intellectual capital. It wasn’t until we had done the math that I discovered that outsourcing was not really saving any money and was also putting us behind schedule for product development efforts.

I want to emphasize that I’m not saying it won’t work for other companies. When someone asks me about outsourcing, I explain to them my fundamental point, which is: do the homework. You owe it to yourself to not be enamored by the fact that you can hire an engineer in India for 50 percent of what it takes to hire one in the U.S. That is a factor, but only one factor in the total equation.

Angel Mehta: Tell me about your brief stint at Oracle under Larry Ellison. What are some of the lessons you learned running Oracle for a while?

Michael Fields: Oracle had some great people, and I learned a lot. But you have to realize that the reason I was appointed President of Oracle USA is because I was the last one running for the door. Oracle at the time was having a lot of trouble… laying off people, writing off business, and trying to collect cash. I was given the opportunity because I was still there through this time.

Angel Mehta: What aspect of Oracle would you want to emulate at KANA or other companies that you run and what are some of the things you would want to avoid emulating?

Michael Fields: Well, the sense of urgency and the focus on commitment and accountability, particularly from a sales and marketing standpoint. You know, Larry was, and still is, very good at that. There are some rough edges to that -- that I wouldn’t want to emulate but I think I want our sales force to have that kind of energy and commitment to success. Not being successful is unacceptable. There’s no acceptable answer to not making your quota monthly, not annually, but monthly. I remember one of the things that Larry told me once that if you’re not selling a product, or you’re not writing the code, explain why you’re here. The underlying message was that people have to realize what’s important: making product and selling it. It simplifies what everyone is here to do. We’re trying to build that kind of attitude here, maybe without some of the harshness.

Angel Mehta: If you could snap your fingers and magically instill a behavior into each of the software sales people at KANA, what would it be?

Michael Fields: Boldness. Believing that you have the technology that satisfies a business problem and you can articulate that at the right level where the money’s spent. Now, don’t misunderstand me. This doesn’t mean that the guys, in my case and Pat’s, it’s not important because although I don’t give Pat any money on technology, if there’s something that’s going to add value Pat is going to have to recommend to me that the product is good because I’m not going to study it, but the problem is that that should happen after the value process, not before. However, more often than not it happens before. I would like to see our sales force bolder in where and how they call on organizations and what they have to say.

Now that means sales reps have to do a different kind of work from what they typically do. Sales reps typically want to know about the product they sell, in my opinion, not realizing that they also need to know more about the company they’re selling their product to. If you’re going to talk to that executive, you have to be able to talk to him about his business. The great news nowadays is that there are so many different avenues to collect information. I remember having to sit in libraries.

Angel Mehta: Every top CEO I know echoes this thought that finding and keeping great people is top priority. What’s the furthest you’ve gone to try and hire someone that you really wanted?

Michael Fields: I have just hired a chief administrative officer who takes the responsibility for the hard areas in a company relevant to its internal processes, including IT, facilities, purchasing, order fulfillment, legal and HR. The kind of hard internal areas that if you want to grow from a $50 million to half- a- billion dollar company, that if you don’t have those things done right, you’ll die along the way.

I hired him into the company at a compensation level 50 percent less than his last job. You might say, well, what in the hell did he do this for. It’s because we’ve worked together before and he’s made a lot of money and he knows that I believe in responsibility, authority and accountability. That is, giving my management team the responsibility and the authority to carry out those responsibilities but also holding him accountable and he knows that he’s going to have the opportunity to really build a world-class infrastructure for the company and he knows that I’m committed to it. So, how you extend yourself sometimes, I think, to get the best people is based on your personal history on what people say about you and know about you either through direct dealings or through others they talk to and how you’ve treated them and how you treat the business.

Michael Fields is the Chief Executive Officer and Chairman of KANA Software Inc. With more than 30 years experience in management of enterprise software companies, Michael has spearheaded successful sales organizations at a number of large corporations, including Oracle USA, where he served as President, and Applied Data Research and Burroughs Corporation. For interview feedback, contact Michael at mfields@kana.com

Angel Mehta is Managing Director of Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies and lead investor in http://www.softwaresalesjobs.com, the #1 site for software sales jobs. Angel can be reached for feedback at amehta@sterlinghoffman.net

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