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June 10, 2010

Never say never

With a new CEO, a new name and a revised strategy, the former Computer Associates has its head in the clouds but does it have its feet on the ground? Jason Stamper reports.

By Jason Stamper

For the second time in just five years, the company formerly known as Computer Associates, and then CA Inc, is changing its name. The previous name change was an effort to distance itself from a financial scandal that saw then CEO Sanjay Kumar plead guilty to fraud charges in 2006.

But that rushed change of identity left the firm with a name that it now says doesn’t convey enough about what it does. It’s also not great for search engines: incoming CEO William McCracken said he was fed up with searching for ‘CA’ and getting results for the state of California. Hence the latest rebranding, say hello to CA Technologies.

CA Technologies has IBM to thank for its 30-plus years in business. The company was only able to exploit its focus on mainframe software thanks to IBM’s decision in 1969 (albeit under regulatory pressure) to unbundle the sale of mainframe hardware from mainframe programs and services.

Charles Wang and his friend and business partner Russ Artzt started a company making mainframe software, later obtaining North American distribution rights for a mainframe program called CA-Sort, originally developed by a Swiss company by the name of Computer Associates.

Wang and Artzt merged their firm with the original Swiss company in 1980, and Computer Associates International was born, with headquarters in Islandia, New York.

It was shortly after its initial public offering in 1981 that the company started its love affair with acquisitions, a passion that is alive and well even today. After its IPO it quickly bought Capex, Information Unlimited Software, Johnson Systems, CGA Computer, and Uccel.

By the 1990s it saw the need to get into client-server computing, a decision which saw it buy Legent for $1.8bn in 1995 – at that time the biggest ever acquisition in the software industry – and data storage software firm Cheyenne Software in 1996 for $1.2bn. The company’s reputation as a serial acquirer was growing even before it splashed out $3.5bn on database management firm Platinum Technologies in 1999, and another $3.3bn on Sterling Software in 2000.

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But the 2000s were not kind to CA. Eight executives in all pleaded guilty to fraud charges brought by the SEC, and the company duly made sweeping changes to management including the hiring of a new CEO, John Swainson.

Swainson quickly steadied the ship. While he radically slowed CA’s acquisitions spending, he also oversaw a period that saw the largest number of new products introduced in its history. The vision at this time was around what it called Enterprise IT Management (EITM), aimed at unifying and simplifying enterprise-wide IT.

Fast forward

Fast forward to today, and there is a great deal more complexity in the typical IT organisation than Wang and Artzt would ever have envisaged. As well as mainframe and client server environments, most companies today are also looking to virtualisation and even cloud computing as key to their plans.

CBR caught up with new CEO William McCracken in London just before CA Technologies’ big CA World event in Las Vegas, which was underway as we went to press. McCracken joined CA’s board in 2005 and became non-executive chairman in 2007. Prior to joining CA, he held numerous executive positions at IBM during his 36 years there. He became executive chairman of CA when Swainson left, and was named CEO and chairman in January this year.

I started by asking him what he felt he brings to the CA table, given his IBM experience. “I think the thing that I would bring would be more experience of the industry rather than a company point of view,” McCracken says. “I recognise working in the industry that there are inflection points in the industry. We’re at one of those now.

“The current worldwide economic environment is driving all businesses to do more with less; there’s excess capacity sitting out there that’s not able to be tapped into, so doing some of the things that we’re able to do from a software technology point of view, enables that,” McCracken adds.

When he talks about an inflection point, McCracken is talking about cloud computing and virtualisation. But while hype could not be higher in both of these areas, there are those that believe cloud computing is an over-used term and is unlikely to make as much of an impact in enterprise IT as many pundits have predicted. So why is CA Technologies backing cloud so heavily? “When people ask me if I think it’s going to happen I say no, I know it is going to happen, because the demand is there for it,” says McCracken.

“If you take it even out of the IT environment, and take it up to the CEO, what is the CEO’s biggest challenge today no matter what the business is? It is changing his or her business model to match the competition,” he continues. “And what does that demand? It demands new applications, new ways of doing things, new services they might provide using Internet capability and so on, and moving it into the cloud allows those CIOs to service the CEO in a way that they need to so they can compete better in the marketplace.”

Governance of the fittest

But what about the concerns that many delegates at CBR events often cite when discussing the notion of cloud computing: concerns over governance, security, visibility and management? “I think the points you bring up are the right ones. The securitisation of all that, the management of all that, it’s all very important pieces,” McCracken says. “And, in the past, they haven’t had the tools to do that. Now there have been very small companies out there that have provided a lot of those tools and those are things that we look at all the time; we’ve got 250-300 companies that we are looking at at any give time as far as targets are concerned.

“The worry though that a CIO at a major corporation has is: is it commercial grade, are they big enough to support me, can I expect 24/7 kind of support? So that’s what puts us in a unique position as a supplier across all platforms.
“So I think those tools on security, those tools on management, those tools on performance management, are what allows people to take advantage of that so it’s kind of like the saying, ‘The best way to predict the future? Invent it.’ That’s what we’re doing.”

Of course, CA Technologies could not have defined this new strategy without first bolstering its own portfolio of technologies. Bolster it certainly has, spending around $700m in the last year or so on acquisitions in the cloud and virtualisation spaces, including Oblicore, Nimsoft, Cassatt, 3tera, NetQoS and Orchestria.

But can CA Technologies really hope to pull this off, even with another change of name? As Redmonk analyst Michael Cote wrote in a recent blog: “The issue for existing vendors and the enterprise IT departments they serve is figuring out how to transition without blowing up the legacy infrastructure too much. It’s one thing for hip upstarts who’re starting from scratch to get all cloud crazy, but moving 20 years of acquired IT – usually from different generations of buzz-tech compliance and a trail of acquisitions – to a new thing can be precarious.”

After all, many will think of CA as being strongest in mainframe environments, or as I suggested to McCracken, even as something of a dinosaur. Does it sit well adopting these modern, hip technologies around cloud and virtualisation? “It is perfect,” McCracken insists. “The stars are lining up for us because we’ve got an enormous mainframe business that is growing again because we’ve invested in it over the years. One to two percent may not be a lot but it is off of that base, and it’s funding our future.

“Then you say why would a mainframe [company] go there; well what did we do for the mainframe? Secure, manage and govern. What do you need in the cloud? Secure, manage and govern. It’s building off of our legacy in the last three and a half decades. It’s perfect for us because it’s what we do, it’s what we know how to do; all we need to do is move it into the new platform, and that’s what we’re doing.”


CBR Opinion

With revenue up 2% for fiscal 2010, and profit up 15%, CA Technologies is looking in pretty good shape. The change of name is neither here nor there, but the enhanced focus on virtualisation and cloud is sure to maintain the company’s relevance to the modern IT organisation. There may be a few bumps in the road as best of breed technologies in these spaces are still emerging, and competition is as fierce as ever. But ultimately, while backing cloud in such a big way is fraught with risk, it’s great to see this ‘dinosaur’ of the industry fighting fit in 2010.


Don’t miss

Don’t miss CBR’s podcast interview with CA chairman and CEO Bill McCracken in its entirety, including more discussion around cloud computing and what he thinks of Apple’s Steve Jobs at

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