Our business is like being in the engine room of a ship, says BMC Software chief executive Max Watson. It’s dark, it’s dirty, it’s dangerous and we love it. Watson may be over-dramatic, but he has every reason to be upbeat. During the last three years BMC has doubled revenues from $288.5m to $563.2m, and expects to achieve a 25% growth in sales again this year. BMC’s rapid growth has been fueled by the $34m acquisition of application management outfit Patrol Software in January 1994. Patrol is an open systems application management suite utilizing autonomous intelligent agent technology. It consists of a graphical management console which acts as the central management point, and knowledge modules – libraries of information which govern the way the agents work. Instead of trying to compete as a vendor of complete system and network management solutions, BMC has followed a strategy of aggressively partnering with the leading systems management vendors. The company’s partnering strategy has been doubled- edged: to persuade systems management rivals to sell Patrol agents as part of their offerings, and to forge close relationships with application leaders such as SAP so that BMC can provide deeper monitoring of such applications. Part of the strategy involves hiring staff with the sole role of forging and maintaining relationships with industry leaders. We then ask other people in the company whether they get a competitive advantage from the alliances, says Bob Beauchamp, BMC’s senior vice president of R&D. A positive response means a bonus for the employee. A negative response means that they get kicked out.
Killer for competitors
We haven’t had to do that yet, says Beauchamp. BMC’s partners usually position Patrol as the ‘recommended’ product for a particular function, which is killer for competitors trying to sell into that particular partner’s customer base, he says. BMC is also trying to increase the amount of revenue it derives from indirect sales – currently running at only 20% to 30% – through reseller agreements with companies like Cabletron, Digital Equipment and Hewlett-Packard. Nevertheless, the company continues to augment its telesales staff with a direct presence which now accounts for 20% of the salesforce. Despite the fast- growth of Patrol – revenues doubled to $103 million in fiscal year 1997 – 81% of BMC’s revenues are still derived from IBM mainframe database administration tools and utilities, its core market since it was set-up in 1980. This is of some concern. Although margins are higher on BMC’s mainframe products than they are on its client/server products, prices are coming under increased pressure from the recent sharp falls in mainframe prices and fierce competition from the ‘old enemy’, Platinum Technology. BMC’s transition, although well on track, is not yet complete.
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