News

Opinion: Joseph McKendrick on CA's Summer Thriller

The movies Wall Street and Other People’s Money never had sequels, but if the producers are looking for new plotlines, all they have to do is watch the high-stakes corporate drama now playing out between Computer Associates and an insurgent group of investors led by Texas moneyman Sam Wyly.

Wyly, an IT industry veteran and direct descendant of an Alamo hero, launched a hardball campaign to take over the management of the world’s third-largest independent software vendor. CA’s current management – who started the company from scratch back in 1976 – is fighting for its existence. All we need is Gordon Gekko to pop in and deliver another “greed is good” speech.

However, CA is not some distressed old-line company ripe for takeover. Rather, CA is a key vendor upon which thousands of organizations rely on for mission-critical software and tools. The company made $5.6 billion in revenues during fiscal year 2000, and leads in many technology segments, including security, storage management, business intelligence, and enterprise portals.

A disruption in a company of this size surely will ripple across the entire industry at a time when it needs it least. Customers, uncertain about CA’s future under new management, may hold off upgrades or new implementations, for example. We’re already seeing such paralysis in the Microsoft world, with users not sure what to do next while the software giant is consumed in an antitrust battle. The rest of the industry seems to be in a state of malaise, paring back growth plans, discontinuing products, and retrenching.

Does CA have underlying structural problems that call for a major management shakeup, as Wyly contends? Or, is Wyly an opportunist coming in to destroy a perfectly functioning enterprise? In the interest of full disclosure, I have worked with CA in the past. This experience has provided me glimpses into the company’s culture and operating philosophy. I will try to provide the pros and cons of both sides of the argument.

Get ahead of the curve and break up the company: While Wyly has a bunch of complaints about CA; his main point of attack is CA’s business model. Namely, that the vendor is a melting pot of technologies, solutions and platforms, but has no unifying theme. Wyly and his Ranger Governance Group have said that the company ought to be broken up into four pieces to better address distinct market segments. He has a point there: ask any 10 people in the IT community what CA represents to them, and you're likely to come up with 10 different conclusions. CA has varied parts that don't seem to make up a whole. To some, CA is a database vendor. To others, it’s a systems management tool provider. Still others see it as an ERP vendor.

Confusion over CA’s business has caused plenty of problems for the company over the years. The company is a conglomeration of acquired companies and technologies. Large acquisitions in recent years include Cheyenne Software, maker of Windows NT storage management solutions; and development tool vendors Platinum Technology and Sterling Software (not so coincidentally purchased from Wyly). Because of its incredible diversity, CA has difficulty achieving mindshare in its many market niches.

Keep the company whole, and leverage its diversity: Is CA a dessert topping or a floor wax? To paraphrase the jingle of Saturday Night Live’s mock commercial of long ago, CA is both a dessert topping and a floor wax. The “dessert toppings” – the fun stuff – include the company’s interBiz products aimed at e-business monitoring and CRM, Unicenter TNG/TND for systems monitoring, and Jasmine ii as application, portal, and knowledge management server. The “floor waxes” (which do the dirty work of IT, of course) include antivirus and security tools, storage, ERP, and a vast array of mainframe management tools.

In recent years, the company has been trying mightily to address the confusion over CA’s brand, which covers more than 700 products. In recent years, the company narrowed its marketing message into four distinct product groups, covering applications, systems management, platforms and business intelligence.

CA is not a new-age company that sprang up as part of the PC and Internet revolutions. Rather, it’s a mainframe company that brings an industrial-strength perspective to all platforms and networks in a corporate infrastructure. Yes, it’s fashionable to criticize companies for being too conservative or legacy-oriented. However, look at all those trendy dot-coms and their pinball machines piled up in the landfills of history. CA is definitely not a hip outfit occupying some converted Silicon Alley warehouse. In fact, its employees are expected to wear business attire to work, and show up on time.

Employees of companies taken over by CA have often left after news of the acquisition, creating skills vacuums within CA’s newly acquired lines. CA is, however, a completely different company than even 10 years ago, when 100 percent of its business came from mainframe shops. Now, only about 35 percent of CA's revenues are derived from mainframe software, and the rest comes from distributed or client/server systems.

Can CA continue to adequately so many varied and seemingly unrelated products under a single roof? Only time will tell. So far, CA continues to pull this off. Most vendors that attempt to support unrelated products spread themselves too thin, and end up short-changing customers somewhere along the line. CA always runs this risk as well, especially if it’s forced to pare down operations in any key areas. Ultimately, market forces could conceivably spin CA into more autonomous entities. In the meantime, CA operates a unique business model within the IT industry, more akin to a multi-line consumer goods company. Those types of companies have no problems selling both dessert toppings and floor waxes, do they?

About the Author

Joe McKendrick is an independent consultant and author specializing in surveys, technology research and white papers. He's a contributing writer for ENTmag.com.