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Is your CEO the smartest person in the company?



CEO Spotlight: Bob Calderoni, Ariba Inc.

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

When once high-flying Ariba ran into turbulence in 2001, it handed the reigns to its resident finance-whiz, CFO Bob Calderoni. As CEO, he has presided over Aribaís emergence as a bonafide stand-alone software company. Angel Mehta, Managing Director of Sterling-Hoffman, chats with Bob about managing a merger of equals, and revolutionizing the strategic sourcing process worldwide.

Angel Mehta: Who were your most important mentors? What were the most valuable lessons they imparted to you?

Bob Calderoni: Iíve had the good fortune of working with a number of really good leaders Ė Lou Gerstner and Jerry York at IBM, Steve Jobs at Apple, and I have been able to glean a little bit from each of them to create my own style. In Jerry York, I got to watch someone come into a business he didnít know and quickly dissect it to effectively drive change. Jerry was a great executive and a great change agent. I think the situations I have found myself in, throughout my career, have also shaped my approach. You learn a lot about a business when you go through tough times. The downturn at IBM and the dark days at Apple were great experiences for me.

Angel Mehta: Was there a particular reason that Ariba needed a CEO with a finance background? What do you think drove their decision to bring you on, given that most software CEOs have a technical or sales background?

Bob Calderoni: Ariba was in a bit of a turmoil following the bubble burst. And the thinking initially was that the company needed someone at the helm who could bring a sense of fiscal responsibility and measure of strong leadership. Given my experience as a financial executive at large companies and my ability to navigate through difficult times, it was expected that I would come in and clean up the balance sheet and right size the organization. And we did that within 30 days. What was not expected was that the bean counter would recreate the company strategy, transform the business model, build domain expertise and step on the pedal of innovation. When I took over, we were a one-product company. In two years, we have become an eleven-product company with a completely re-architected platform that was positioned for growth.

Angel Mehta: What advantages have you found in having a finance background to head a software company? Have you ever felt at a disadvantage? Have you ever felt as if there are areas of the business that you wish you knew more about?

Bob Calderoni: I donít know of anyone coming up through the ranks who has greater visibility into an organization from top to bottom across all divisions and the responsibilities that go with that, than the CFO. As a CFO, youíre constantly learning a lot about everything in the business. So itís a great platform to prepare for being a CEO. When I trained as a CFO under Jerry York, it wasnít good enough to just be responsible for the finance organization. That was expected. What was also expected was to know about manufacturing even though you werenít a manufacturing guy, and to know about the product portfolio even though you werenít an engineering guy, and to know the operating structure of the sales organization even though you werenít a sales guy.

Angel Mehta: Tell me about one key lesson / principle / concept you took away from your tenures at IBM and Apple?

Bob Calderoni: Organizations and people are very, very resilient and can handle a lot more change than they think they can. But what they need is, somebody to lead them through the change. Iíve often heard that ďthe organization canít do this,Ē or ďif we try to do that, weíre going to kill the organization.Ē The best companies have strong leaders who push their teams to innovate and change and give them the support they need to do it. Thatís what makes them so great.

Angel Mehta: What aspects of the culture at IBM do you aspire to bring to Ariba? What aspects of the culture at Apple do you aspire to bring to Ariba? What aspects of each would you actively work to keep OUT?

Bob Calderoni: From a cultural point of view, Iíve seen polar extremes. The culture at IBM was very disciplined, buttoned-down and process oriented. And the culture at Apple was pretty freewheeling. Ariba is somewhere in the middle of these two extremes Ė probably closer to Apple than IBM. We have a lot of very smart people who work hard and are empowered to make a difference without a lot of structure and bureaucracy. Youíre given enough rope to get your job done without a lot of limitations. And thatís the type of culture I want to try to further within the organization Ė results-oriented, low on rules, high on individual initiative.

Angel Mehta: Why does Ariba have a good chance of continuing as a stand-alone software company? Is there enough potential left in its market for growth?

Bob Calderoni: With our transition to an on-demand delivery model, weíve opened access to thousands and thousands of customers we could never reach before. So the market for spend management solutions is much bigger than it ever was. Itís largely unpenetrated and very early in the innovation cycle. And these are the characteristics of a market where a nimble, highly focused company like Ariba can thrive. The types of markets in which companies get absorbed by larger entities are typically fully penetrated and at the end of their innovation cycle, and the only thing left to do is consolidate. In addition, weíve got a lot of smart people and expertise in addition to technology, and we think that is a significant barrier to entry. Solving the spend management challenge takes deep commodity expertise and years of procurement experience and you just canít engineer your way to that.

Angel Mehta: A few years after the acquisition of FreeMarkets, have the predictions of reverse-auctioning changing the sourcing process come true? What impact has the acquisition had on Aribaís growth?

Bob Calderoni: A key part of our strategy is being a truly integrated solution provider that combines technology with deep domain expertise and services. One of the things that attracted us most to FreeMarkets was their people and the deep domain expertise they had around hundreds of categories in sourcing, and the global organization they had built around it. That organization is a vital part of Ariba today. It complements the technology that we offer our customers and is one of the main reasons that companies choose to work with us. The combination or coming together of advanced technology with this deep domain expertise has dramatically changed the way companies source spend. Today, companies are sourcing tens of billions of dollars of spend they never thought could be sourced or auctioned.

Angel Mehta: Based on your experience managing through some very turbulent times, do you think itís always fair to measure the capability of an executive leader by the results generated? What do you consider when deciding whether someone on your team needs to be replaced? How do you know?

Bob Calderoni: Results always matter. But you have to measure against the right set of results. And as strategy shifts and business needs change, youíre measuring different things at different times. We knew we needed to go from one product to a broad array of products. Nothing else would have mattered if we couldnít get the products out. So the results we looked for during that period were all tied to delivery. At another point in our transition, we were focused on building a service organization. The results we looked for then were related to building assets and capabilities that would enable us to get results in the marketplace. Our intent is always to do what is best for the organization and our shareholders. But you canít measure success and failure on stock price alone.

Angel Mehta: Whatís been the most difficult period of your tenure as CEO of Ariba?

Bob Calderoni: The merger with FreeMarkets. Usually, when you have a merger, thereís a big company and a small company, and the big company just takes over. But when youíre bringing together two companies of equal size and strength, as we did with Ariba and FreeMarkets, no one really takes over. What we set out to do was merge a company that is predominantly software with a company that was predominantly services. The cultures and attitudes were totally different. And we werenít trying to convert one to the other, we were trying to create something new which was a blended technology and services company. That proved to be a lot more difficult than anyone anticipated and it was two years before we could say it was done.

Angel Mehta: What are your top 3 business priorities for 2007?

Bob Calderoni: Our top priority is to complete our transition to an on-demand business model and ignite the growth gene that has been dormant, as weíve moved though this transition phase.

Bob Calderoni is Chairman and Chief Executive Officer of Ariba Inc., a leading spend management solutions provider. Prior to joining Ariba, he served as Senior Vice President of Finance and Chief Financial Officer for Avery Dennison, and before that as Senior Vice President of Finance and Corporate Controller for Apple Computer, Inc., and as Chief Financial Officer and Vice President of Finance for IBM's $8 billion Storage Systems Division. In 2006, Bob was named among the 100 Most Influential People in Finance by Treasury & Risk Management Magazine. For interview feedback, contact Bob at bcalderoni@ariba.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
www.softwaresalesjobs.com , the #1 site for software sales jobs. Angel can be reached for feedback at amehta@sterlinghoffman.net 

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