After almost 40 years at its helm, Compuware CEO and founder Peter Karmanos has handed over control at last. Before the news was announced Jason Stamper caught up with president and COO Bob Paul, who has since stepped into the hotseat.
Compuware’s new CEO Bob Paul
In its 35th anniversary year, Compuware’s founder and CEO, Peter Karmanos Jr., promoted Bob Paul to the position of president and COO. It was time for some fresh thinking at the venerable software and services firm, one of the few daring and innovative enough to give IBM a run for its money in the hard-fought mainframe software world.
Three years on, and Karmanos has signalled his intention to step out of his CEO shoes by 2013, his 40th anniversary, or before. If all goes to plan, Paul is about to take the reins of an iconic, billion-dollar company.
After this interview was first published Bob Paul was indeed confirmed as Compuware’s new CEO.
Bob Paul did not ease quietly into his new role in 2008. He embarked on a major exercise to refocus the firm around its core strengths and opportunities.
It was an exercise that would see both divestitures and acquisitions, as he set out to create what he called Compuware 2.0. He made no bones about the fact that the company needed work. "We have limited brand equity outside our client base and our corporate identity is frankly non-existent," is how he put it in 2008.
Perhaps with the influence of another new hire, vice president Tanya Heidelberg-Yopp, who had come from MTV Networks, Diversified Entertainment and Motown Center, the company’s new tagline was, ‘We make IT rock around the world’. For a company with software and services in the mainframe, application performance and portfolio management markets, it was a bold move.
Thanks to its three decades of history, it compared its founders, Karmanos Jr., Thomas Thewes and Allen Cutting, with rock heroes of the 1970s from bands like Led Zeppelin. It even unveiled a new logo that it is still using today, featuring three guitar plectrums. Its website screamed: "Use our instruments and rock", "Why just keep IT rollin’ when it could be rockin’?", and "Colleagues are about to become fans." Compuware 2.0 was born.
The company’s recent performance suggests Paul’s refocusing efforts are underway if not complete. In its fiscal 2010, against the backdrop of a challenging macroeconomic climate, revenue was down slightly from $1.09bn to $892m. Profit was up 9%.
In its most recent quarter, sales were up 7.5% and net income was up almost 40%, enabling Paul to state: "Compuware continues to focus on delivering steady increases in revenue, earnings and margins, and Q3 was no exception."
In response to the use of that rock and roll rebranding, Paul says: "You know Compuware had a feel to it several years ago of being a 37-year old mainframe or services-based company. And although I don’t think you can change the image or culture of an organisation except through performance – consistent performance – I do believe that you can help it along.
"So under the umbrella of all these changes, we wanted to create an image change. And quite honestly, it was more about helping our employees understand where we were going and how serious we were about the direction we were heading, as much as it was about the rest of the market place."
So after a few divestitures and a few acquisitions, what does Compuware look like today? Apart from its respected professional services business, there are really two sides to Compuware 2.0. There are its mature businesses, which include mainframe solutions and its elderly Uniface rapid application development (RAD) toolset.
There’s nothing wrong with mature businesses: they bring in reliable profits that can be reinvested. In Compuware’s case, that investment is into its Gomez application performance management suite and Changepoint portfolio management offerings, both of which are partly the result of acquisitions.
Finally there’s this weird division called Covisint, formed in 2000 by a consortium of General Motors, Ford and DaimlerChrysler to act as a B2B exchange, back when B2B exchanges were going to rule the world.
Compuware bought it in February 2004, and since has expanded both its technology (with the likes of collaboration, portals, secure information management and more recently clinical decision support) and its addressable markets, moving out of automotive into healthcare, oil and gas and other industries.
It has some interesting technologies, but isn’t it too focused on verticals and not sufficiently in keeping with Compuware’s focus on performance management? Paul agrees. "We plan on doing an IPO carve out of Covisint once they hit $80m in trailing revenues, which should be about this time next year," he says.
So, put Covisint and the mature products to one side for a moment, and what’s left? The Gomez application performance management and Changepoint business portfolio management technologies.
However, Changepoint had disappointing results in its latest quarter, so is it losing momentum? Paul says not. "I think the story is still to be told there," he says. "Changepoint grew first-quarter revenues 70% and second quarter 38%. Third quarter was tough. We know that’s because some deals slid into Q4."
It’s the Gomez application performance management (APM) technologies, though, that are surely hottest right now. With the move to more virtual and cloud-based infrastructures, the performance of systems and applications is becoming harder to monitor, manage and optimise, and this is exactly where Gomez fits.
Just this month Compuware put all its APM tools under the Gomez umbrella, and announced a raft of product updates to help companies improve the performance of on-premise, SaaS or cloud-based applications.
A sign of its thought leadership was news that it is the first company to have worked with Google to integrate Page Speed – an open source project started at Google – to give developers and organisations actionable insight and recommendations on how to speed up web application performance.
Compuware’s Cloud Sleuth technology and ecosystem can monitor the end-user experience of performance of applications in any cloud, in any geography, in real time.
As Paul says: "As cloud becomes less about the early market and more into mainstream buying decisions, which I think we’re a couple of years away from, both the security and performance issues have to get solved. We’re going to transition Cloud Sleuth from an ecosystem and use that as a front end to now start seamlessly getting to the Gomez platform.
"It’s a transition from looking at some cool things that may help me make a decision about what cloud provider to choose, to monitoring my applications in those clouds for a nominal subscription service. It goes from thought leadership to a value proposition for cloud providers and our target customers," he adds.
Compuware 2.0 is not yet fully formed. But the signs are there that Paul is the right choice of executive to finally take over from Karmanos after his 40-year run. Bold, visionary, but still focused on operational discipline, he is starting to get Compuware rocking again.
Listen to the entire podcast with Bob Paul here.