Company execs detail CA's restructuring work, current state and future plans.
Computer Associates spent the past year cleaning house and shopping for technology. Over the next 12 months, the software vendor intends to focus on establishing partnerships, growing revenue, winning over skeptical customers and reconfirming its position as one of the top-four management vendors.
After a long period of internal strife that included accounting scandals, federal investigations and indictments of key managers, CA is just one year into what the current management team identifies as a four-year rebuilding process. Among the challenges are streamlining internal operations, refocusing product direction and changing a long-standing reputation for poor customer service – essentially re-inventing CA.
“For the past year, we have been undergoing a necessary – and at times painful – restructuring effort that will get the company back to a sound economic base,” CEO and President John Swainson, who is approaching his one-year anniversary with CA, recently told members of the press.
Internal issues that could not be ignored included poor IT systems, which CA is attempting to address with a large SAP rollout that covers “everything from HR to CRM,” he said.
Swainson confirmed that CA not only neglected internal operations and burned bridges with customers but also approached public relations defensively. The company often shot itself in the foot, industry watchers say.
“The management organization at CA now seems to want to communicate more openly with customers, and it’s approaching them in a much less defensive manner,” says Rich Ptak, principal analyst with Ptak, Noel & Associates. “It could be Swainson’s experience with IBM, but he is displaying an openness, or willingness, to discuss and be frank about the problems and perception of the company’s past.”
Perhaps that’s because Swainson’s take on CA is that it needed to evolve into a different type of software vendor. As he explained it, CA in the late 1990s was in a build-through-acquisition mode in an effort to mature into a large software vendor from a start-up position. Now with the size of the company established and multiple technologies – possibly too many – within its portfolios, Swainson said his job is to filter through and fine-tune product offerings while putting in place the systems and processes that can make a large software vendor successful.
One area that Swainson already addressed is the sales organization. For example, the company changed its sales-compensation model. This could account for the 20% turnover in the sales organization and fewer new deals, Swainson said, but it was a necessary move. He said rewarding sales staff for maintaining ongoing relationships with customers would benefit the company.
“We know it’s going to take some time to rebuild customer relationships,” he said.
CA continues to bring new technologies in-house that it feels align with its newly designed business units. The five units address storage, security, management, business service optimization and products. The latter group was established to ensure CA products are supported in customer organizations, even if they aren’t among the company’s key focus areas going forward.
In the past year, CA acquired Netegrity, Concord Communications (and with that Aprisma Management Technologies) and Niku, to name a few. The Netegrity and Concord buys have CA establishing its Framingham, Mass., offices as a key center for development of its Unicenter management unit. Alan Nugent, senior vice president and general manager of the Unicenter business unit at CA, is on hand to oversee. Acquired companies nearby are currently relocating to the facility.
Nugent said with top competition from HP, IBM and BMC Software, CA will continue to focus on managing the foundation of corporate networks to help customers achieve more automation and control in their networks. The company addressed its network management weakness with the Concord buy, and plans to invest more in application management through acquisition or internal development.
“Application management is a portfolio gap for them and it’s a hot area in terms of their core enterprise accounts,” says Stephen Elliot, a senior analyst with IDC. “[Java 2 Platform Enterprise Edition] and deep-dive diagnostics are driving a lot of deals, and executives are looking for the application management on top of the network.”
CA says 70% of its revenue comes from what it calls the enterprise 2000 customers, which Elliot says are most likely to need strong application management products. Companies such as BMC and Mercury Interactive could represent competition in that area or could be potential acquisition targets, industry watchers say. The price of these larger vendors may be too high for Swainson, who said CA would probably spend $500 million or so on acquisitions this year.
Swainson acknowledged the company is debating a build vs. buy strategy for application management technology.
“We have some technology in that space, but we are not completely comfortable with what we have vs. what we need,” he said. “In terms of competition, our point of differentiation will be that we link to everything else in a competitive and complex environment. We will be Switzerland and stay neutral.”
