BMC chief assesses management software arena

After a year of poor sales and lost revenue, BMC Software showed some incremental improvements with its recent earnings announcement. Newly appointed BMC CEO Robert Beauchamp spoke with Network World Staff Writer Denise Dubie about those results and a look at BMC's future.

BMC's earnings show revenue down from the same time last year, yet up from last quarter. To what do you attribute the decrease in revenue?

Last year was pretty ugly for all the software companies, and if you go back and look there's not a whole lot of results that went up and not only [in terms of] enterprise software [vendors], but the high-tech [industry] in general. It was a nasty year, and we were certainly caught up in that downturn that so many other companies participated in. There was also likely a wave of investment in e-business, and our customers typically lag in management investment in investing on new infrastructures and new technologies, so when new technologies come out it's some time after that that they begin to invest in management.

The good news is that that wave appears to be beginning now where they're coming back and saying we now have to make all this new e-business technology and applications that we acquired solid, mission-critical, available and perform well. And that's where BMC comes in. So there's certainly some computing capacity bubble that needed to be burned off, and there's evidence to suggest that's happened. There's also that wave phenomenon that I believe we're now at the beginning of as more customers look at systems management.

Has BMC done anything differently this past quarter because your earnings report shows improvement?

Yes, we're always trying to improve across all the organizations. Clearly there's been some good sales force execution: I'll point to Europe as one example. . . . In my 12 years, I've never seen the international organization so well run and so well managed. We've seen better execution across the board in sales.

Do you think there's still a strong market for BMC's staple products?

One of the real opportunities we have, even as large and as successful as BMC is, is we've got so [many customers still] available to us. It's a huge opportunity for us just to get back to existing customers to help complete their product line. There are so many customers that don't have our product, and there are so many [customers] that have some of our products but not all. There's no lack of demand or lack of market for our products. Year over year we grew over all of our product families, both distributed and mainframe. The arrows are pointing up quarter over sequential quarter.

Will revenue from other areas, such as professional services, be able to sustain BMC?

We have achieved a level of trust with the global 2000 companies so that many view us as their entrusted advisers to see that their enterprises — and that means their businesses — stay up and perform well. But more and more, our customers do not have the expertise, the time or the desire to develop best practices for systems management. . . . Professional services is the key to that. We bring in our technology, we bring in our expertise, and we quickly get the customer's enterprise management environment up and running and optimized.

Analysts have said BMC's success is more in the mainframe arena than distributed systems, and that future success may be directly tied to BMC's new support for IBM's zSeries 900 hardware platforms and z/OS operating system. Do you agree? What will it mean to BMC?

The zSeries is an important new server. It's basically the replacement technology for IBM's existing mainframe platforms. And it will be our key IBM mainframe platform going forward. Clearly that is an important platform because it's a very important platform to the global 2000.

Can BMC stay ahead of the economic curve with its revenue is so closely tied to mainframe or large systems sales?

They are tied to it, but I'll just point out this quarter mainframe revenue was slightly more than half, license revenue slightly more than half, but last quarter it wasn't. Last quarter, distributed systems, Unix and Windows platforms outperformed the mainframe. So we're really fairly well-diversified right now. So that protects us from some swings on any particular platform somewhat, but if any of the platforms suffer or thrive we can participate in that. We are more diversified than we used to be.

What would you say the key management issues for mainframe or large systems users are?

I would say that the problems mainframe users have are the same problems that Unix or Windows have users if they are trying to run mission-critical applications. We really don't care what platform they run on. What we worry about is how important is this application to be available. And what they need is to ensure that those systems stay up and running. And if a failure begins you can see it very quickly and recover back to your desired service level quickly. And more optimally, what you want to be able to do is predict an outage or interruption in service level before it occurs. And then take actions to keep that outage or reduction in service level from occurring. And that's the same whether it's in a Windows environment, or a Unix environment or a zSeries environment, that's just a function of mission-critical computing.

There's nothing specific to the mainframe?

The only thing I would say is specific to the mainframe is that it's still an extraordinarily scalable and strong platform, but the customer issues are the same.

What does BMC focus its R&D on?

We have to continue our heterogeneous focus, which is what we just described. Global 2000 has operating systems from everybody, databases from lots of people, applications from lots of people, whether its SAP, Ariba, PeopleSoft or in-house, so we are going to continue to give them a consistent way to manage all that complexity with a single layer from one company. That's one. On the other front, we have to respond to new high-growth areas to become key to customers success, such as storage management. We certainly have got our investment strategies focused on service management. We also investing heavily in service provider technologies, and our service provider business unit is focusing on giving management technology to the XSP market out there. And in fact, we just announced the intention to have hosting and reseller agreements.

How do you think network and systems management has evolved? And what do customers have to make their priority in terms of new technologies?

There are two ways. There are kind of two axis when you think about network and systems management. One axis is infrastructure management, what I mean by that is managing all the discreet components that make up the enterprise, from the network nodes to the applications to the databases to the middleware components to the firewalls, the Web servers, all that complexity, managing the availability and performance of each of those components. That's one axis if you think of it as an X Y chart. The other axis is really application management, and that's where the customer is really focused on taking an application view of their availability. Customers need to be able to view the end-to-end availability of the application as the objective.

So really you're talking about changing the way that you look at systems and network management and raising the bar so you're doing from an application point of view. And the next step past that is really looking at it from a business process point of view. That's really the long-term horizon to where systems and network management is going. It's going away from component management to really managing your business and adding value to the business itself. By the way, while you're doing that you have to keep pouring it on with the component management. You can never get away from the plumbing that's necessary to do the traditional network and systems management. It's just going to have keep getting better and easier to use.

How do you think network management can help people better manage, say, their e-commerce systems?

I think it's enormously important. Not too many years ago if [a customer] had an network outage or a server outage or a database corruption, the company might in fact lose money and maybe stop the manufacturing line and there might be some very tense meetings in the executive suites discussing the outage, but the end customers more than likely had absolutely no visibility to that.

Today, the companies are focused on allowing their customers, their end users, which also include their suppliers and their partners, to cut through the veneer of the organization and look straight into the back office of the company. So when an outage occurs or when the quality of the customer experience is degraded you hurt your customer relationship immediately and you have the potential to do it with all your customers at once.

So the impact of an outage to a company, say a B2C an Amazon for example, obviously for them an outage could impact a large percentage of all their customers, could wreak havoc on their reputation, could affect their corporate image. But if you go back in time, before e-commerce, it would have been invisible to all except the employees of the company. These new technologies have really raised the bar of network and systems management to where it's no longer something you want to do to just to be more efficient. It's something you have to do to ensure that your business continues.

And what about mobile and wireless computing? How can network management vendors help companies incorporate this new technology into their enterprise?

I think about mobile and wireless in two ways. One of them is we're going to make the assumption that the client of the future is wireless. You have to assume we need to managing the new infrastructure like the WAP servers and things that are going to be part of the new infrastructure to allow that environment to function properly. The other way is our own products. We're going to assume that our customers of many of our products are going to want to access those products with wireless and handheld clients. So we have to make our products available to support that environment, and we are investing to support that area.

How does BMC decide which new technologies to focus its energies on?

Whenever new technologies come along, we have to assess the impact it's going to have on our customers. For us, it's really pretty simple. If we see customers beginning to adopt a new technology, then we have to invest in that area. And make sure that if that new technology is on the critical path to the availability of customer applications, then BMC has to invest in it. We make those decisions, and we prioritize based on the customers investment in new technologies.

Are there any new technologies you see as being critical to BMC customers right now?

Mobile and wireless is clearly one. Application-centric storage management is one. And I think that offering customers a service provider model for systems management is another.

What do you think is a key to BMC staying successful?

I think one of the keys to a successful company is knowing what you're good at it and staying focused on it. Assuring our customers' applications are available and performing well is our business. That is what we're focused on. There's a lot of opportunity in that space. And we're going to stay focused on it. We don't want to get too far from our knitting.