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CA is nothing if not a complicated company, the product of 150 acquisitions assembled over a tumultuous 34-year history. But Bill McCracken, the company's CEO since January, is rallying CA around a single (if not simple) technology movement: cloud computing.
More specifically, McCracken says he's intent on leveraging CA's cash cow mainframe software business to finance acquisitions and "world class" internal development in one overarching direction: software for managing and securing multivendor cloud environments that commingle corporate data centers with software or infrastructure as a service. Just as Steve Ballmer has Microsoft placing an "all-in" bet on cloud computing, McCracken is shoving in all CA's chips--and he professes to be betting on a sure thing.
"I've watched every evolution and revolution in this industry, and we're at another inflection point," says McCracken, a youthful 67-year-old who spent 36 years at IBM before joining CA in 2007 as chairman. He was named interim CEO last September following the retirement of John Swainson--the former IBMer who pulled CA out of its financial fraud mess--before becoming the full-fledged CEO in January of this year. "Cloud computing is going to happen for sure," McCracken says. "Write it down. Put my name on it if you want to."
As the world emerges from the worst recession in 20 to 30 years, he says, companies are in a fighting mood. For one thing, having streamlined their operations, IT and otherwise, over the past two years to save every dollar they could, "they come out of these times much, much stronger than they were coming in," McCracken says. At the same time, those companies' CEOs understand that competitors exploiting the economics and time-to-market advantages of cloud computing threaten their business models and very existence. As an example, he points to Netflix, whose Internet-based movie-rental business has driven market leader Blockbuster to the brink of bankruptcy. The cloud extends the Internet commerce model further into rapid infrastructure provisioning and application development.
On a more personal level, McCracken recalls how another Internet-driven rival turned his world upside down when he was running sales and marketing for IBM's PC business in the 1990s. "Michael Dell did it to me with the doggone business model he built," he recalls, noting that direct sales and build-to-order manufacturing allowed Dell to collect payments from customers even before it paid its parts suppliers. "I don't want that to happen to me more than once."
And so CA is latching on to the cloud--as a customer (Salesforce.com, ADP, and Taleo's Vurv are among the 30 software-as-a-service applications the company uses internally, and its cloud-based Labs On Demand environment lets its developers self-provision capacity for app testing); as a SaaS vendor (over the next three to five years, McCracken sees half of CA's revenue growth coming from SaaS versions of its products); and, most strategically, as a supplier of management and security tools for cloud/virtualized data centers (the focus of most of its announcements next week at CA World in Las Vegas, where the company will also unveil a Web services-based architecture code-named Catalyst that integrates its portfolio of acquired and homegrown products).
That's not to suggest that CA is bailing on its legacy mainframe software business. May is "Mainframe Madness" month at CA, and the company will unveil next week a revamped, drag-and-drop graphical user interface that it hopes will not only drive mainframe software sales but also get young developers to consider a career in the field now that the big-iron old guard is starting to retire. CA's mainframe software business, which still represents about 60% of the company's $4.3 billion in annual revenue, is now growing--very profitably--at 1% to 2% a year after being flat to down a few years ago. "It funds our future," McCracken says.
McCracken on "maniacal focus" and a bit of madness
CA has told Wall Street that it will grow its total revenue in the high single digits over the next three years, requiring its non-mainframe business to grow in the low teens. Recent acquisitions like Nimsoft (IT performance and availability monitoring), 3Tera (whose "grid OS" lets enterprise and service provider customers offer on-demand computing services), and NetQoS (network performance management and service delivery management) are emblematic of CA's acquisition strategy: Add complementary technologies and get access to new channels, don't just buy revenue. It's an extension of the strategy under Swainson's five-year tenure, during which time CA's most prominent acquisitions were Concord (network management), Niku (IT project and portfolio management, renamed Clarity), and Wily (application performance management).
During the course of our two-hour interview in his Madison Avenue office, McCracken, like Swainson before him, made frequent references to transforming the CA culture, which under founder Charles Wang had been steeped in conquest and hard-nosed sales at the expense of customer satisfaction and loyalty. McCracken, like most new CEOs, talked about passion and teamwork and the need to instill a sense of urgency and a "maniacal focus on execution" in every employee. Along those lines, he's been making the rounds of CA's operations worldwide, talking not just with his top execs but also with developers and managers.
CA, due to report its fiscal 2010 financials on May 13, hasn't been immune to the recession: Its revenue was flat last year, though it managed to boost operating margins. As part of a 2010 restructuring plan revealed in April, CA plans to lay off close to 8% of its workforce and close some facilities.
To put a fresh face on things, CA will roll out a revised company name and new tagline branding at CA World next week. More to come on that and multiple other fronts as the company marches into the McCracken era.
The Business of Going DigitalDigital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.