CA chief details company plans

CA chief details company plans

Computer Associates International intends to become the No. 1 systems and security management vendor in the next 12 months and solidify its position as a market leader ahead of competition from HP and IBM.

After about five months on the job, President and CEO John Swainson Tuesday spelled out how CA will better address customer needs, narrow its product focus and potentially acquire more technology. As part of his effort to realign internal business units and refocus product direction, Swainson identified the two technology areas as the most ripe for new growth.

"We targeted those areas based on market share and revenue growth," Swainson says. "We believe that those markets will grow faster than the software industry as a whole and that we are positioned to grow faster then those markets."

Already a significant player in both markets, Swainson says CA will continue to expand its product portfolio through acquisitions such as the mainframe access management technology the company purchased from InfoSec last week. Identity and access management products will remain core to CA's eTrust security portfolio, which includes security event management, patch management, virus detection and other security management tools.

In terms of its Unicenter management software, the vendor says it will continue to provide tools to manage emerging technologies and move its customers closer to an automated, on-demand state of computing. Like competitors HP and IBM, CA introduced its version of an automated and intelligence data center a couple of years ago.

"Infrastructure management is one of the more challenging IT problems to solve," Swainson says. "The complexity continues to grow and it's still our vision, one that we share with others in the industry, to help deliver an infrastructure that could automatically reconfigure itself."

The difference between CA and competitors, Swainson says, is breadth of products with HP and better management tools with IBM. For example, HP remains weak in security management and has abandoned mainframe management. As for IBM, Swainson says CA dominates the desktops and provides more mainframe and Unix management capabilities.

The vendor also says it will remain committed to the mainframe. While others such as HP have determined not to focus on mainframes because it offers relatively flat returns in terms of growth, CA says the mainframe remains part of customers' enterprise networks. According to CA, mainframe management products generate "about 50 percent of our revenue at high margins and yields a steady cash flow stream that allows us to invest in innovation across the company."

To lead the management charge, CA this month hired ex-Novell CTO Alan Nugent to serve as senior vice president and general manager of its Enterprise Systems Management unit. The division is one of five newly defined by CA. Security Management, Storage Management, Business Service Optimization (BSO) and CA Products Group round out the five units going forward.

The company will also package more products as solutions, Swainson says. For example, the company will deliver an integrated eTrust and Unicenter solution package designed to help enterprise IT managers address Sarbanes-Oxley compliance.

In addition to identifying areas of growth, CA also "reprioritized and de-prioritized" other technology areas. For example, the company will continue to focus on storage management, but from a systems or security management perspective. In a letter to shareholders, Swainson stated: "While storage will remain a critical component of our technology offerings, we need to recognize that its entire sector is becoming commoditized."

Another area CA will direct attention from is its application development and lifecycle management products, which fall under the AllFusion brand. "We have some important products in that area, but we are not going to try to duke it out with Microsoft and IBM in the applications space," Swainson explains.

Aside from technology, CA will address new markets and work over the next 12-months to cement relationships with some 18,000 enterprise customers.

For one, CA will target the enterprise primarily, but also pursue consumer and small-to-midsize market opportunities, which have been identified as a source for new revenue.

"Our consumer business generated US$30 million in incremental revenue last year and is on track for US$50 million next year. This contributes to our bottom line and takes minimal investment," Swainson's stated in a letter to stakeholders.

For the fiscal year 2004, CA reported revenue of US$3.28 billion, an 8 percent increase from the US$3.03 billion in revenue recorded for fiscal year 2003.

To address customer needs, CA will shift is sales focus from a "product and transaction focus to a solutions and relationship focus," CA says. That means sales teams will be responsible for sales across brands and channels. CA says indirect sales make up less than 10 percent of its total revenue and the company wants to work to get that number closer to the industry average of 51 percent.

Lastly, CA will monitor itself more closely. In light of the company's accounting scandal, Swainson detailed in the letter how the company would "use rigorous financial analysis to benchmark each investment opportunity."

The letter states: "Strong financial controls with Sarbanes-Oxley will also help us better manage the business."

Last year, CA reduced its headcount by 5 percent and established a centralised procurement system that has enabled the company to renegotiate vendor contracts and save US$17 million annually, the company says. CA also resumed its share buyback program and redeemed US$660 million convertible notes.

The changes at CA may not be obvious at first, Swainson says, but over time the company will be able to become more agile and nimble - in effect more responsive to customer needs.

"Customers will notice a change in how we approach and deal with them," he says. "Over time, customers will see a much more focused and much more internally aligned CA, which in the long-term will enable us to move much more quickly in the market place."

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