Earnings may be up, but so are expenses, and then there’s that nagging matter of boardroom allegations that CA’s accounting problems were rooted with founder Charles Wang.
But if you forget about all that, CA has also just come off a two-year string of deft acquisitions that have added things like IT governance, ITIL process support, web application monitoring, application correlation, and other technologies that are injecting new life into its product lines.
According to CEO John Swainson, the next stage of CA’s product direction is integrating all the pieces that it’s been busily acquiring. While not ruling out future acquisitions, Swainson said that the major pieces are behind it.
I would be surprised if we did any [more] major acquisitions…We don’t have any large functional holes, he said. We need to do a lot more work on integration.
As an example of what you’ll be seeing over the next 12 to 18 months, Swainson pointed to the new suite that marries the Wily products, which perform tracking of web apps from server to browser, with CA’s Service Metric Analysis used for analyzing and setting service levels, and Service Desk, where flagging service levels are supposed to auto-generate trouble tickets.
We’re not talking about anything revolutionary, he admitted, concerning the core message of unified service modeling, at this year’s CA World conference.
It’s no secret that CA is trying to reinvent itself as an IT process provider, rather than a provider of branded point tools aimed largely at data center administrators. Of course, so are CA’s traditional rivals, because markets for systems management frameworks are pretty mature. Unless you’re Opsware, which targets web-based infrastructure, the conventional wisdom now is that sales of products aimed at data center administrators alone have gone pretty flat.
It’s not surprising that CA is most excited about the acquisitions, saying the Clarity products (covering project portfolio management) acquired with Niku as among its fastest growing. Nonetheless, Swainson said that sales growth has also been pretty healthy for the more traditional Unicenter network Systems Management (NSM) products as well.
What CA, and its rivals, would like is to see frameworks like ITIL (for IT service management), COBiT (for IT governance), ISO 17999 (for IT security) and others catalyze transformation of enterprise IT management into an applications market, much as APICs did for inventory management 25 years ago (which provided the seed for what eventually became the MRP, MRP II, and ERP markets). Such frameworks provide software firms common targets around which they can design general-purpose applications that can hit critical mass markets.
For instance, by specifying that a configuration management database (CMDB) should be at the heart of any IT service management process, ITIL has defined a common target for vendors like CA to revamp their offerings.
While ITIL adoption has become very popular among corporate IT organizations, Swainson doesn’t believe that ITIL alone has driven demand for cross-cut suites, such as the tie-in between end-to-end performance (the Wily tools) to service metrics and service desk.
This will get me into some trouble with ITIL fanatics, said Swainson, ITIL was clearly something that was in the right place at the right time. Interest in ITIL is not driven by people saying they want more process. As IT is becoming a more critical part of business operations, people are realizing that ITIL, COBiT, and these other frameworks could give them a way to advance down that road.
So you can expect a lot of work to tie in the Clarity offerings, which track the business of running IT operations, as opposed to the operations themselves, to show resource consumption in many of the traditional Unicenter management business.
And although CA’s storage management business is one of more mature, Swainson expects growth with some of the recent acquisitions targeting records management, such as MDY. Of course, there’s an ironic twinge to that, as the specter of CA’s past is still haunting it.
Recently, the company’s Special Litigation Committee issued a report that accused former chairman and founder Charles Wang for creating the climate and culture under which accounting abuses, such as the so-called 35-day months, threatening a $500m civil suit.
As to whether the company should invest its energy in exorcising the past or rebuilding for the future is a question that Swainson doesn’t want to touch. He emphasized that the special litigation committee was strictly a CA board matter, not involving the company’s day-to-day management.
I was interviewed for it [the committee’s report] once, said Swainson. While I and the rest of the management team are spending timer on the future of the company, it was important members of the board spend time to bring closure.
For CA, it’s the best of times, worst of times.
The high point of Swainson’s reign so far has been the transformation of CA’s acquisition strategy. While CA used to buy companies for cash flow, often shedding staff with military precision, the new CA is more interested in acquisitions for technology synergy and has tried to keep the brain trust intact.
Among the highlights have been the acquisitions of Netegrity for web identity and access management; Niku for IT governance and project portfolio management; and Wily Technologies, for tracking Java (and now .NET) applications from end to end. From a technology standpoint, probably the most obvious gap is in managing and governing SOA. There are still several firms such as SOA Software, AmberPoint (which just received backing from SAP’s venture arm), and Actional, that are still available for the picking.
But Swainson’s challenge is that, although he’s not responsible for CA’s past, the headlines keep reappearing. Although the company’s financials are hardly terrible, they haven’t yet provided evidence that the technology roadmap is paying off.
But the other side of the coin is that the past still lurks. The former CEO is about to go to jail. A special litigation committee created by the board has just issued a report alleging that former chairman and founder Charles Wang was indeed culpable for abuses like the 35-day months.
The funny thing is that CA isn’t the only company that’s cooked the books in one shape or form. For a while, it seemed like almost every company in Silicon Valley was being found guilty of manipulating accounts. Those scandals have even snagged respected companies like Apple, whose former CFO is accusing Steve Jobs of misleading him on options. It makes you wonder, is anything sacred anymore?
But in a way, these seemed almost like victimless crimes, in that customers were not directly affected. Yet the abuses at the old CA, even those that weren’t illegal, seemed personal. They ranged from Wang’s take-no-prisoners attitudes to a culture that treated customers as captive audiences.
That was the old CA. The new CA is buying cool technologies and is starting to meld some cool applications. But it’s not the only one with such a strategy. And on this go round, has some real competition, like a resurgent HP Software that’s beginning to capitalize on its Mercury acquisition. CA needs a bang-up quarter to show that its cool new technologies are gathering hot payoffs.