Chordiant Software, Inc. (CHRD-NASDAQ)
2005 Interview with:
Stephen Kelly, CEO
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solutions that automate and manage operational business processes for leading service-driven global organizations in retail finance, telecommunications and consumer direct industrie.

Chordiant Software, Inc.
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A strong experienced management team that has initiated a strategy for repeat purchases across a customer’s organization has Chordiant Software positioned for growth

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Chordiant Software, Inc.

20400 Stevens Creek BoulevardSuite 400
Cupertino, CA 95014
Phone: 408-517-6100

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Stephen Kelly
Chief Executive Officer

Interview conducted by:
Lynn Fosse, Senior Editor
October 20 2005

Stephen Kelly
Chief Executive Officer

As CEO, Kelly is responsible for the worldwide operations of Chordiant Software, focusing on our customer engagements as well as corporate governance and business development. Beginning in 1997 in London, Mr. Kelly built Chordiant's international operations, and then assumed worldwide responsibilities for Chordiant's field operations in early 2000.

In addition to his Chordiant experience, Mr. Kelly brings more than ten years of senior management experience with Oracle where he held a variety of roles directing the vertical markets organization, including financial services, telecommunications and retail; European alliances organization; and government sales. Mr. Mr. Kelly also worked with ICL after graduating with an honors degree in business administration from the University of Bath, England.

Company Profile:
Chordiant Software, Inc. is an enterprise software provider of solutions that automate operational business processes to meet the needs of service-driven organizations such as retail banks, consumer credit, insurance providers, and telecommunications companies.

Chordiant automates the end-to-end operational business processes that enable the business from the back-office systems, existing applications and processes, through to the communications with customers. The emphasis on the automation of operational business processes is designed to address employee productivity; operating costs of end-to-end processing and work management; and customer effectiveness – each a key issue faced by companies in the service industries.

Headquartered in Cupertino, California, Chordiant maintains offices in Boston, MA; Mahwah, NJ; Manchester, NH; London; Paris, Amsterdam and Munich.

CEOCFO: Mr. Kelly, we spoke a year ago, and you were looking at 2005 as the year of growing geographically in North America and making inroads in Real-Time predictive decision for surface companies; how have you fulfilled that vision and are you still working on it?
Mr. Kelly: “We are well on the path of executing on that vision and did an acquisition in the December quarter of 2004 to complete the product set; we bought a company called KiQ Limited. In terms of the growth in North America particularly, and geographic strategy, which is all about Europe; we are continuing to be strong in Europe and expand in a rapid growth in North America. North America now accounts for some 60 percent of our revenues. We have been successful selling our Decision Management to some of the biggest companies like Time Warner Inc. (TWX-NYSE).”

CEOCFO: What does your Decision Managent software do for them?
Mr. Kelly: “Time Warner is a huge company. There are about 3000 agents in their inbound service center, servicing almost 20 million customers. What it has allowed them to do, is in Real-Time, when the customer calls in, provide the requested service, whether it is change of address or billing inquiry. They have a business case that has been over achieved. They have a conversion rate in an inbound service center of around 50%, which is incredible. It has had a huge impact on the revenue growth of that company.”

CEOCFO: Tell us about the intelligence that is built into your product.
Mr. Kelly: “There is a lot of intelligence that we have in the software and the analytics around the models. Each one is uniquely applied to a customer. It is even to the intelligence of the consumer, so if you have 20 million consumers calling in to a big service center, then the goal is to provide a personalized service to that individual consumer. There is customization involved to make sure that the conversation between the agent and the consumer is very representative of the consumer’s needs and wants.”

CEOCFO: Is Chordiant more than quality software?
Mr. Kelly: “We are taking intelligence to the point of the channel and to the next level. Whether the channel is the network in banking or the contact center in the card industry or telecoms, what we are seeing is a new generation of consumer companies that are able to fulfill their vision of unique customer service. It is providing a much better one-to-one direction to consumers.”

CEOCFO: How has the industry changed for Chordiant?
Mr. Kelly: “There has been seismic change in the last few years. Many of the competitors that we looked at three or four years ago disappeared or evaporated. Many of them have gone into decline. It is interesting that Chordiant is out there on its own in terms of growing as a business and becoming more successful. The competitors that we saw three or four years ago have been acquired or just gone away.”

CEOCFO: Do businesses figure this out on their own or do they need someone with the clout and knowledge of Chordiant?
Mr. Kelly: “Chordiant is competing today with in-house builds or custom-builds where the IT department is built from the ground up. There is an increasing realization that Chordiant is quicker, faster and cheaper. If we are deploying, as we have done a 20,000 ft. call center, we are going to be around as part of that infrastructure for the next ten years. We are going to be part of the infrastructure with a successful operation for many years. With the reference-ability for strong customer success, that has now translated itself to many more customers and potential customers choosing not to go down a custom-build route, which has many more costs. They are coming to Chordiant and seeking our expertise to help them with their consumer management problems.”

CEOCFO: Please tell us about your recent contract with T-Mobile in Austria.
Mr. Kelly: “We seek to increase not only the service capability of T- Mobile but we are very much looking to make offers in the channel in Real-Time that are specifically targeted to the individual consumer. We have seen a big shift in T-Mobile representative of companies with fantastic brands, and have invested now in sophisticated in-bound marketing where with our software they can offer products and services that meet their consumers requirements.”

CEOCFO: As a consumer, I would appreciate that!
Mr. Kelly: “I went on a call when I went to see one of these mega financers, this is a customer of ours that had about five thousand agents; I loved to go and sit and listen to the calls from agents. A very experienced agent actually sold a customer three different products in about seven minutes. It is not only a big benefit in terms of revenue increments, but the interesting think is at the end of the call, the consumer said it was such a great experience; you solved all my building issues and not only that, I feel that you listen to what I need and you give me exactly what I want. There is a lot of cynicisms out there over what happened in the last twenty years where the extreme was relentless direct mail, and now with our software, these consumer companies can be incredibly sophisticated in there targeting and make sure that they meet the needs and wants of their consumers. It is a great win/win relationship.”

CEOCFO: Are there new products and services that you are looking to add?
Mr. Kelly: “In terms of where there is a big push from our customers in the marketplace, there is a tremendous push to actually build on our foundation’s absolutely unique vertical applications. We started this in the credit card industry. We have specific solutions coming down the track around management for credit card companies and collections. There is a thing called charge-back and dispute where if you get a query on your monthly bill from you credit card issuer, you can get a resolution through a set of processes. We have seen a lot of interest in very specific applications for the card industry and banking. There are a number of product releases planned in these areas over the next year.”

CEOCFO: What is involved in marketing your services?
Mr. Kelly: “I think the conversations we have with customers can be in the pre-sell cycle. The shortest is probably six months but the sell cycle could be more than a year. We have a good direct sales force. We also partner with IBM, Accenture, CapGemini and several others that play a strategic role in terms of the sell cycle but also around delivery. IBM (NYSE: IBM) is probably our strongest partner and has a very big commitment and a growing practice area around Chordiant deployments."

CEOCFO: What is the financial story today for Chordiant?
Mr. Kelly: “The story is a consistent growth and we are looking for growth in the future, which excites everybody in the company and our investors. We went into the last summer (2005) from the time we did the interview, successful, profitable, generating cash and growing. We probably had a hiccup in the 9-month period from all this through March, April and May, where we got out of compliance. We have invested heavily in that area. I think the worst is behind us now, so we are absolutely back in compliance with a strong focus on internal excellence and governance program to make sure that we have full compliance and great assurance around our control process. We are looking forward into next year where the G&A expense we incurred, is trading down to a normalized rate. It is all about profitable growth. We have a good track record of growing the top line and we are focused on delivering profit for our investors and cash generation.”

CEOCFO: How will you do that?
Mr. Kelly: “It is clear that we have a great strategy and we are in a position where we are close to market leadership particularly in financial services. We set out a strategy for the company and we have been very consistent with that strategy; so it is now at about execution. The biggest consumer market place in the world is North America and they offer the most rapid growth for us. The things investors should watch for are just more U.S. customer wins that will fuel the growth of the company. In the last ninety days, we have announced new customer wins of companies as prestigious as Wachovia Corp. (NYSE: WB), ING and HSBC Group (NYSE: HBC).”

CEOCFO: What do investors miss about Chordiant?
Mr. Kelly: “The investors are very sophisticated, but one thing they might not pick up on is the business model and the nature of our revenue cycle. Chordiant has been very successful with customers and it is not just because of the initial customer deployment; it is the model for repeat purchase across the customer’s organization. We do actually get into the phase and the business models probe, but the amount of investment from a customer with Chordiant, can range from $5 million in the low-end enterprise space, up to $30 or $40 million. Our success is also about the longevity of our business model and the fact that we are going to be part of the customer applications for the next three years, as they keep coming back with repeat purchases. They can grow their footprint to represent sometimes in excess of twenty million dollars."

CEOCFO: In closing, what is the role of your management team?
Mr. Kelly: “The management team is strong and has a lot of enterprise software experience. George de Urioste, our COO and CFO, has a lot of experience, both from the finance side and in operations. In fact, he has been the CEO of companies himself. The longest period of his career was spent in the early phases of Remedy back in the 1990s, where George spent seven years. He took that company from the beginning, and turned it into a $100 million company as their CFO. That obviously enabled him to join Chordiant and contribute a great deal to the management team. The other key members of the management team include Rob Mullen, who heads our worldwide field operations who also has a lot of enterprise experience. He has been with us over six years now, and prior to that he had a long tenure with IBM in financial services. He has worked in all key geographies, including Europe, and he is based out of Boston. The other key members of the management team include David Barrow who is part of the vision group for us, and Jim St. Jean, who runs our engineering group. Jim had his own companies and also ran solid engineering groups while he was in the enterprise software space. So there is a lot of experience in the management team. Complementary to that, Sam Spadafora is our Chairman. Sam is very experienced, having been with companies like Sun and Santa Cruz Operation, and has over 40 years in the industry.

This team is growing a company that is very focused around market leadership in our key verticals of financial services and telecommunications and on profitable growth.”


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“It is clear that we have a great strategy and we are in a position where we are close to market leadership particularly in financial services. We set out a strategy for the company and we have been very consistent with that strategy; so it is now at about execution. The biggest consumer market place in the world is North America and they offer the most rapid growth for us. The things investors should watch for are just more U.S. customer wins that will fuel the growth of the company. In the last ninety days, we have announced new customer wins of companies as prestigious as Wachovia Corp. (NYSE: WB), ING and HSBC Group (NYSE: HBC).” - Stephen Kelly


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