For the past three years, CA has been trying to graft a large slice of IBM conservatism onto itself. Since John Swainson, former VP of software sales at IBM, took over as CEO, he has gutted the senior management layer, bringing in a phalanx of IBM veterans to sit alongside a handful of luminaries from CA’s world of systems management software.
By many informed accounts, the New York-based company is coming through one of the most fundamental restructurings ever undertaken by an executive team – and, by the same measure, one that was wholly necessary.
The tarnishing of CA’s reputation culminated last year in its former CEO, Sanjay Kumar, starting a 12-year jail term and agreeing to repay $800 million after he admitted playing a central role in a $2.2 billion share manipulation and accounting scam – just one of a series of frauds involving (now long-gone) CA executives. But the reputation was also defined by the company’s attitude to customers: for over a decade it was the prime exponent of “bottom-feeding” takeovers as it snapped up a long list of ailing software companies and exploited the inherited customers who were locked into dying products.
While the transformation in reputation, products and finances is not yet complete, Swainson argues that the “big blocks” are now in place and the changes among the company’s 14,000-strong employee base constitute a new CA. “At least 50%” of the employee base has changed; the existing go-to-market approach of the sales force bears little resemblance to the old Computer Associates (as it was previously known); and the company is now heavily committed to product development (rather than simply absorption).
“Although executives will still be working on this for another couple of years, the company is through the traumatic stage of tearing things apart and putting them back together,” he says.
But he knows that customers do not forget the trauma of being burnt easily. “I still talk to people who tell horror stories of things CA did to them 20 years ago. It takes a long time to effect a change in perception, but I view the fact that we will sell a billion dollars of new software this year [on top of upgrades and support] as the best testimony I can have from my customers. I know damn well they won’t buy from me if there are substantial lingering issues.”
What they are buying into is a shift by the company from selling from a catalogue of 1,200 products to one that is distinctly solution-centric. “When we go to a customer now, we end up talking about the problems they are trying to solve – not our products,” says Swainson.
One overarching theme of those conversations is “greater automation”, he says. “CIOs are struggling with an explosion of complexity – the difficulty of managing ever-growing numbers of systems in their environments. How do they ensure those co-exist effectively with the systems that are already there without throwing large amounts of labour at the problem?”
The automation of IT processes through IT governance, the management of IT assets and the securing of those assets is what the new CA is all about.
And today those technology areas are fuelled largely by internal development. “CA acquires to supplement what we build, not instead of it. Until relatively recently the company did very little of its own organic development. It was focused on industry roll-up and arguably lost sight of the real business of software it was in. We are changing that, [but] it is a fairly long process to re-tool the company and the mindset of the development team.”
That development team now numbers almost 5,000, split between product line teams whose job it is to “nurture” the existing products, a team building a “wholly new business around [IT] governance”, and a pure R&D team that is looking at “wild and crazy ideas” emerging from universities, start-ups and their own labs.
But while it looks forward, CA is reliant on one heritage business. Its mainframe software lines still account for over half of the company’s revenues. However, not only are those very profitable, so providing the source of funding for new developments, but the revenue they generate is actually rising – albeit modestly, says Swainson.
Now, with five quarters of growth behind it (including a 10% rise to $1.1 billion in its third quarter, ending 31 December, and net margins of 14%) CA is looking like it can justifiably reclaim its place at the top table of software. Back in the early 1990s, it was the world’s largest software company, ahead of Microsoft. It has no pretensions to retake that slot, but with $4 billion in annual sales, the company is not giving up its position in the top ten without some persuasion.
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