<PAGE>

                                                                   Exhibit 10.11

October 2, 2000

Mr. Stephen Kelly
Two Oaks
36 Esher Park Avenue
Esher
Surrey KT10 9NX.
United Kingdom.

Dear Stephen:

Chordiant Software, Inc. (the "Company" or "Chordiant") is pleased to offer you
the position of President and Chief Operating Officer reporting directly to me.
The terms of this offer are described below:

1.  As President and COO of Chordiant, you will perform the duties customarily
    associated with this position, and such duties as may be assigned to you by
    me. It is agreed that your duties will include working in the U.S.A and the
    rest of the world. Your start date will be October 1, 2000.

  Your initial base salary will be $300,000 per year, less standard deductions
  and withholdings, paid semi-monthly.  You will be eligible for quarterly MBO
  bonuses up to $50,000 per quarter based upon the Company's determination that
  you have achieved certain mutually-agreeable objectives.  You will also be
  eligible for a bonus of up to 20% of your salary, to be paid at the end of the
  2001 calendar year, at the discretion of the Board based upon your achievement
  of annualized objectives to be established by the Board for your position.  As
  with all executives, receipt of MBO bonuses and year-end bonuses will be
  subject to the achievement of our annual financial plan and both Company and
  individual management objectives.  The standard deductions and withholdings
  will be applied to so much of your duties, which will be carried out in the
  USA.  With regards to your salary, MBO bonuses, bonus and stock options
  attributable to the duties performed outside the USA, no US standard
  deductions and withholdings will be applied and all such amounts will be paid
  to you Gross.  You will personally be responsible to pay any US or non US
  taxes arising on your Non-US element of total compensation.

2.  Upon approval by the Board, the Company will grant you an option to purchase
    800,000 shares of the Company's common stock (the "Stock Option"). Provided
    that you remain employed by the Company, the Stock Option will vest each
    month at the rate of 1/36 of the shares subject to this Stock Option.

    In the event of: (a) a sale of substantially all of the assets of the
    Company, (b) a merger or consolidation in which the Company is not the
    surviving corporation, or (c) the transfer of more than 50% of the voting
    interests of the Company (a "Change in Control"), during the first thirty-
    six (36) months of your employment as President and COO, then you will
    immediately vest in 50% of the then unvested shares subject to your Stock
    Option set forth in this paragraph 3.

    Your Stock Option shall be consistent with the terms and conditions
    contained in the applicable stock option plan documents and stock option
    agreement between you and the Company. From time to time, the Board reviews
    the outstanding option grants for senior Company executives and may issue
    additional options in the future at its sole discretion.

3.  The Company will reimburse you for reasonable documented business expenses
    pursuant to Company policy. In addition to your salary and incentive
    compensation, you will be eligible for standard Company benefits, including
    paid vacation and medical and dental coverage. You will also receive the
    following non-standard benefits: a life insurance policy in the amount of
    $500,000 with the premiums to be paid by the Company; reimbursement for tax
    services up to $5,000 per year; reimbursement for four round-trip flights
    from California to the United Kingdom per year for you and your wife,
    children and nanny; reimbursement for your nanny expenses up to $30,000 per
    year; and reimbursement for your home rental expense in the Bay Area in an
    amount not to exceed $4,000 per month. The Company reserves the right to
    modify your compensation and benefits from time to time, as it deems
    necessary.
<PAGE>

4.  You will be expected to abide by all of the Company's policies and
    procedures. As a further condition of your employment, you agree to refrain
    from any unauthorized use or disclosure of the Company's proprietary or
    confidential information or materials. You also agree to continue to comply
    with your Proprietary Information and Inventions Agreement (attached). By
    accepting this offer, you are representing that you are not a party to any
    agreement or subject to any restrictions (e.g., a non-compete) with any
    third party or prior employer that would conflict with or inhibit your
    performance of your duties with Chordiant.

5.  Either you or the Company may terminate your employment relationship at any
    time with or without cause or advance notice. If the Company terminates your
    employment without cause at any time, then: (a) the Company will make
    severance payments to you in the form of continuation of your base salary in
    effect on the termination date for 12 months following the termination date,
    payable on the Company's ordinary payroll dates, subject to standard payroll
    deductions and withholdings; (b) if you elect continued coverage under
    COBRA, the Company will pay your COBRA premiums for up to 12 months,
    provided, however, that the Company's obligation to make these payments will
    cease immediately if you become eligible for other health insurance benefits
    at the expense of a new employer; and (c) the vesting of your Stock Option
    will be accelerated so that you will immediately vest in 50% of the then
    unvested shares subject to your Stock Option set forth in paragraph 3
    herein. As a condition to your right to receive any of the payments or
    benefits provided above, you agree that you shall provide the Company with a
    full release and waiver of any claims or rights against the Company or
    related parties in a form acceptable to the Company.

6.  If you resign or your employment is terminated for cause, all compensation
    and benefits will cease immediately, and you will receive none of the items
    listed under paragraph 6 above. For purposes of this letter agreement,
    "cause" means: (a) conviction of any felony or a crime involving moral
    turpitude or dishonesty; (b) participation in a fraud or act of dishonesty
    against the Company; (c) willful breach of the Company's policies; (d)
    intentional damage to the Company's property; (e) material breach of this
    Agreement or your Proprietary Information and Inventions Agreement; or (f)
    conduct by you that, in the good faith and reasonable determination of the
    Board, demonstrates gross unfitness to serve. Physical or mental disability
    will not constitute cause.

7.  This letter constitutes the complete, final and exclusive embodiment of the
    entire agreement between you and Chordiant with respect to the terms and
    conditions of your employment. In entering into this agreement, neither
    party is relying upon any promise or representation, written or oral, other
    than those expressly contained herein, and this Agreement supersedes any
    other such promises, representations or agreements. It may not be amended or
    modified except in a written agreement signed by you and a duly authorized
    Company officer. As required by law, this offer of employment is subject to
    proof of your right to work in the United States.

If you choose to accept our offer as described above, please sign below and
return this letter to me.

I am enthusiastic about the prospect of your leading the Chordiant team, and
look forward to working with you to build an outstanding Company.

                              Very truly yours,


                              By:  /s/ Sam Spadafora
                                   -----------------
                                   Sam Spadafora
                                   Chairman and CEO


Attachment A - Proprietary Information and Inventions Agreement
<PAGE>

Agreed and Accepted:

By:  /s/ Stephen Kelly
     -----------------
         Stephen Kelly

Date:  January 5, 2001
       ---------------


ATTACHMENT A

                            CHORDIANT SOFTWARE, INC.
                        EMPLOYEE PROPRIETARY INFORMATION
                            AND INVENTIONS AGREEMENT


In consideration of my employment or continued employment by CHORDIANT SOFTWARE,
INC. (the "Company"), and the compensation now and hereafter paid to me, I
hereby agree as follows:

1.   NONDISCLOSURE

     1.1 Recognition of Company's Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company's Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company's
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

     1.2 Proprietary Information. The term "Proprietary Information" shall mean
any and all confidential and/or proprietary knowledge, data or information of
the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the Company.
Notwithstanding the foregoing, it is understood that, at all such times, I am
free to use information which is generally known in the trade or industry, which
is not gained as result of a breach of this Agreement, and my own, skill,
knowledge, know-how and experience to whatever extent and in whichever way I
wish.

     1.3 Third Party Information. I understand, in addition, that the Company
has received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

     1.4 No Improper Use of Information of Prior Employers and Others. During my
employment by the Company I will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employer or any other person
to whom I have an obligation of confidentiality, and I will not bring onto the
premises of the Company any unpublished documents or any property belonging to
any former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.
<PAGE>

2.   ASSIGNMENT OF INVENTIONS.

     2.1 Proprietary Rights. The term "Proprietary Rights" shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.

     2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I
made prior to the commencement of my employment with the Company are excluded
from the scope of this Agreement. To preclude any possible uncertainty, I have
set forth on Exhibit B (Previous Inventions) attached hereto a complete list of
all Inventions that I have, alone or jointly with others, conceived, developed
or reduced to practice or caused to be conceived, developed or reduced to
practice prior to the commencement of my employment with the Company, that I
consider to be my property or the property of third parties and that I wish to
have excluded from the scope of this Agreement (collectively referred to as
"Prior Inventions"). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit B but am only to disclose a cursory name for
each such invention, a listing of the party(ies) to whom it belongs and the fact
that full disclosure as to such inventions has not been made for that reason. A
space is provided on Exhibit B for such purpose. If no such disclosure is
attached, I represent that there are no Prior Inventions. If, in the course of
my employment with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Company Inventions without the Company's prior written
consent.

     2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby
assign and agree to assign in the future (when any such Inventions or
Proprietary Rights are first reduced to practice or first fixed in a tangible
medium, as applicable) to the Company all my right, title and interest in and to
any and all Inventions (and all Proprietary Rights with respect thereto) whether
or not patentable or registrable under copyright or similar statutes, made or
conceived or reduced to practice or learned by me, either alone or jointly with
others, during the period of my employment with the Company. Inventions assigned
to the Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as "Company Inventions."

     2.4 Nonassignable Inventions. This Agreement does not apply to an Invention
which qualifies fully as a nonassignable Invention under Section 2870 of the
California Labor Code (hereinafter "Section 2870"). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

     2.5 Obligation to Keep Company Informed. During the period of my employment
and for six (6) months after termination of my employment with the Company, I
will promptly disclose to the Company fully and in writing all Inventions
authored, conceived or reduced to practice by me, either alone or jointly with
others. In addition, I will promptly disclose to the Company all patent
applications filed by me or on my behalf within a year after termination of
employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not use for any purpose or disclose to third parties without
my consent any confidential information disclosed in writing to the Company
pursuant to this Agreement relating to Inventions that qualify fully for
protection under the provisions of Section 2870. I will preserve the
confidentiality of any Invention that does not fully qualify for protection
under Section 2870.

     2.6 Government or Third Party. I also agree to assign all my right, title
and interest in and to any particular Company Invention to a third party,
including without limitation the United States, as directed by the Company.

     2.7 Works for Hire. I acknowledge that all original works of authorship
which are made by me (solely or jointly with others) within the scope of my
employment and which are protectable by copyright are "works made for hire,"
pursuant to United States Copyright Act (17 U.S.C., Section 101).

     2.8 Enforcement of Proprietary Rights. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting,
<PAGE>

evidencing, sustaining and enforcing such Proprietary Rights and the assignment
thereof. In addition, I will execute, verify and deliver assignments of such
Proprietary Rights to the Company or its designee. My obligation to assist the
Company with respect to Proprietary Rights relating to such Company Inventions
in any and all countries shall continue beyond the termination of my employment,
but the Company shall compensate me at a reasonable rate after my termination
for the time actually spent by me at the Company's request on such assistance.

     In the event the Company is unable for any reason, after reasonable effort,
to secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and attorney
in fact, which appointment is coupled with an interest, to act for and in my
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary Rights assigned
hereunder to the Company.

3.   RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.

4.   ADDITIONAL ACTIVITIES. I agree that during the period of my employment by
the Company I will not, without the Company's express written consent, engage in
any employment or business activity which is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company and for one (l) year after the date
of termination of my employment with the Company I will not induce any employee
of the Company to leave the employ of the Company. I agree further that for the
period of my employment with the Company and for one (1) year after the date of
termination of my employment with the Company, I will not solicit the business
of any client or customer of the Company (other than on behalf of the Company).

5.   NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.

6.   RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company's premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice. Prior to
leaving, I will cooperate with the Company in completing and signing the
Company's termination statement.

7.   LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique
and because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.

8.   NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or registered mail,
three (3) days after the date of mailing.

9.   NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

10.  GENERAL PROVISIONS.
<PAGE>

     10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by and construed according to the laws of the State of California,
as such laws are applied to agreements entered into and to be performed entirely
within California between California residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in Santa Clara
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.

     10.2 Severability. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. If moreover, any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, it shall be construed
by limiting and reducing it, so as to be enforceable to the extent compatible
with the applicable law as it shall then appear.

     10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns.

     10.4 Survival. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.

     10.5 Employment. I agree and understand that nothing in this Agreement
shall confer any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with my right or the Company's right
to terminate my employment at any time, with or without cause.

     10.6 Waiver. No waiver by the Company of any breach of this Agreement shall
be a waiver of any preceding or succeeding breach. No waiver by the Company of
any right under this Agreement shall be construed as a waiver of any other
right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.

     10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 of this
Agreement shall apply to any time during which I was previously employed, or am
in the future employed, by the Company as a consultant if no other agreement
governs nondisclosure and assignment of inventions during such period. This
Agreement is the final, complete and exclusive agreement of the parties with
respect to the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing and signed by the party to be charged. Any subsequent change or changes
in my duties, salary or compensation will not affect the validity or scope of
this Agreement.

     This Agreement shall be effective as of the first day of my employment with
the Company, namely: _______________, 20__.

     I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

Dated: ___________


_______________________________________
(Signature)

_______________________________________
(Printed Name)


ACCEPTED AND AGREED TO:

CHORDIANT SOFTWARE, INC.
<PAGE>

By: ____________________________________

Title: ___________________________________

_______________________________________
(Address)

_______________________________________

Dated: _______


                                   EXHIBIT A

                         LIMITED EXCLUSION NOTIFICATION


     THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and the Company does not
require you to assign or offer to assign to the Company any invention that you
developed entirely on your own time without using the Company's equipment,
supplies, facilities or trade secret information except for those inventions
that either:

     1.  Relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company;

     2.  Result from any work performed by you for the Company.

     To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

     This limited exclusion does not apply to any patent or invention covered by
a contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

     I ACKNOWLEDGE RECEIPT of a copy of this notification.

                              By:_________________________________
                                    (PRINTED NAME OF EMPLOYEE)

                              Date:_______________________________
WITNESSED BY:


_______________________________________
(PRINTED NAME OF REPRESENTATIVE)


                                   EXHIBIT B

TO:  CHORDIANT SOFTWARE, INC.

FROM:  ________________________

DATE:  ________________________

SUBJECT: Previous Inventions
<PAGE>

1.   Except as listed in Section 2 below, the following is a complete list of
all inventions or improvements relevant to the subject matter of my employment
by CHORDIANT SOFTWARE, INC. (the "Company") that have been made or conceived or
first reduced to practice by me alone or jointly with others prior to my
engagement by the Company:


     [ ]  No inventions or improvements.

     [ ]  See below:

          ______________________________________________________________________

          ______________________________________________________________________

          ______________________________________________________________________

     [ ]  Additional sheets attached.

2.   Due to a prior confidentiality agreement, I cannot complete the disclosure
under Section 1 above with respect to inventions or improvements generally
listed below, the proprietary rights and duty of confidentiality with respect to
which I owe to the following party(ies):

<TABLE>
<CAPTION>
       Invention or Improvement               Party(ies)                    Relationship
<C>            <S>                            <C>                             <C>
     1.  ______________________         ______________________          ______________________
     2.  ______________________         ______________________          ______________________
     3.  ______________________         ______________________          ______________________
</TABLE>
   [ ]    Additional sheets attached.