Swainson outlines CA strategy

Swainson outlines CA strategy

Computer Associates International intends to become the number one systems and security management vendor in the next 12 months, solidifying 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, 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 said. "We believe those markets will grow faster than the software industry as a whole and that we are positioned to grow faster than those markets."

Already a significant player in both markets, Swainson said CA would continue to expand its product portfolio through acquisitions such as the mainframe access management technology the company purchased from InfoSec earlier this month.

Identity and access management products will remain core to its 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 will continue to provide tools to manage emerging technologies and move its customers closer to an automated, on-demand state of computing.

Infrastructure management

Like competitors HP and IBM, CA introduced its version of an automated and intelligence data centre a couple of years ago.

"Infrastructure management is one of the more challenging IT problems to solve," Swainson said.

"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 said, was 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 said CA dominated the desktops and provided more mainframe and Unix management capabilities.

The vendor also said it would remain committed to the mainframe. While others companies such as HP had determined not to focus on mainframes because it offered relatively flat returns in terms of growth, CA said the mainframe remains part of customers' enterprise networks.

According to CA, mainframe management products generate "about 50 per cent 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 hired ex-Novell CTO, Alan Nugent, this month 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 Optimisation (BSO) and CA Products Group round out the five units going forward.

The company would also package more products as solutions, Swainson said. For example, the company would 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 "reprioritised and de-prioritised" 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 recognise that its entire sector is becoming commoditised."

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 said.

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

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 $US30 million in incremental revenue last year and is on track for $US50 million next year," Swainson said. "This contributes to our bottom line and takes minimal investment."

For the fiscal year 2004, CA reported revenue of $US3.28 billion, - an 8 per cent increase from the $US3.03 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 said. That means sales teams will be responsible for sales across brands and channels.

The company said indirect sales made up less than 10 per cent of its total revenue and it wanted to work to get that number closer to the industry average of 51 per cent.

Buyback program

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

Last year, CA reduced its headcount by 5 per cent and established a centralised procurement system that had enabled the company to renegotiate vendor contracts and save $US17 million annually, the company said. CA also resumed its share buyback program and redeemed $US660 million convertible notes.

The changes at CA might not be obvious at first, Swainson said, but over time the company would 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 said. "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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