CA's alive with new people, products, and practices, but old habits--and impressions--die hard.
It's tempting to partition the history of Computer Associates around one seminal moment: the October 2003 revelation of massive accounting malpractice that led to hundreds of millions of dollars in fines, criminal prosecutions, and a dismantling of the company's organization. But the tempest that eventually enveloped the world's fourth-largest independent software developer stretches back much further, to a founder-led culture that emphasized hard selling over relationship building, that viewed scores of acquired companies as customer magistrates rather than seeds of product innovation. Long before the October surprise of 2003, CA was, as rival Larry Ellison once cracked, "where software goes to die."
No one ever said it was going to be easy--not least CEO Swainson.
Photo by James Leynse
John Swainson, the straight-talking IBM veteran who took the helm of CA in November 2004, is the first to admit that his Marshall Plan--rebuild the company's operations, product portfolio, customer relationships, employee morale, and reputation--will take years. CA (the name Computer Associates was dropped last year) has shown a new commitment to acquiring smartly, reaching out to big accounts, and even innovating, but so far those efforts have produced mixed results.
Many customers still see CA as a mash of products, not a single, strategic enterprise software vendor in the league of Oracle or Microsoft. In an InformationWeek survey of 169 CA customers completed in February, respondents gave the company an overall satisfaction rating of 6.3 out of 10--not quite a D, as the score might imply, but still below the scores of other tech vendors in similar InformationWeek surveys. However, when compared with a CA customer survey we fielded in 2002, a year before the accounting scandal hit, there are signs of improvement. For one thing, the percentage of customers completely unhappy with CA has dropped to 13% from 37% four years ago.
The accounting scandal left plenty of carnage: $225 million in restitution to cheated shareholders. Twenty of the top 32 executives and seven of the top 10 are gone; some were fired, others bolted. Four execs, including former CFO Ira Zar, were convicted, and two more, including former CEO Sanjay Kumar, await trial. Only two board members, former U.S. Sen. Alfonse D'Amato and chairman Lewis Ranieri, remain from the pre-scandal CA. (No criminal charges were ever brought against CA's co-founder and former chairman, Charles Wang, who retired from the company in 2002, though several related lawsuits have named him.)
What Swainson found upon his arrival in 2004 was a company not only under legal and regulatory fire (see story, p. 46), but one also in structural disarray. Products from some 150 acquisitions over nearly three decades were managed mostly as brands, scattered around the company in units that rarely communicated. Swainson almost immediately created five product divisions--systems management, security management, business service optimization, storage management, and a broad products group--each with its own top VP, accounting responsibilities, and dedicated sales staff, and each with products increasingly integrated on top of a common management database.
Swainson's management team may be new, but it's decidedly old school--mostly executives from companies with "more evolved" sets of business controls, says chief operating officer Jeff Clarke, who came to CA from Hewlett-Packard in April 2004 after piecing together the HP-Compaq merger. Bob Davis, CA's CFO, was the No. 2 finance man at Dell. Michael Christenson, CA's executive VP of strategy and business development, ran investment banking for Citigroup. Alan Nugent, the senior VP who oversees the Unicenter product line, was previously CTO at Novell. Patrick Gnazzo, CA's first-ever chief compliance officer, came from defense contractor United Technologies. Then there's the IBM contingent: CEO Swainson served 26 years at Big Blue in sales and development; chief marketing officer Donald Friedman was at IBM for 30 years; Gregory Corgan, executive VP of worldwide sales, 24 years; Andrew Dutton, general manager for Europe, Middle East, and Africa, 17 years.
Owing to his IBM pedigree, Swainson has gotten every CA exec on the same page of customer relationship building, instead of the "transaction" mind-set that dominated the old guard. That culture started changing not with Swainson's arrival, several customers say, but with the promotion of Kumar to CEO in 2000 and Kumar's subsequent hiring of sales chief Corgan.
When Kumar brought in Corgan, CA had loads of salespeople to grind it out with customers and manage contracts, but it had no account directors to manage relationships. Now, the company has 270 account directors, some specific to geography, others to the products they sell. Almost 60% of CA's worldwide sales team has turned over since Corgan's arrival. He introduced support specialists who know the company's products inside out and presales people fluent in broader IT architecture. The sales directors for CA's four world regions have been in those positions for less than 18 months, and half of the 20 area leaders (those in charge of groups of states and countries) came to those jobs in the last 14 months.
Although they provide a blueprint for improving customer relations, those major changes can lead to customer confusion in the short term. "There isn't the continuity there today that there was in the '90s," says John Wade, CIO of St. Luke's Health System, which uses the Unicenter management platform and CA monitoring tools in its operation of 10 Midwest hospitals. St. Luke's is going wireless: Within two years, all of its physicians will tote tablet computers instead of clipboards, and every professional will carry a wireless phone. Yet CA hasn't stepped up to help with that transition. "My frustration with CA is that they continue to treat us like just another stop in their sales cycle," Wade says. "And we're an organization that would like to work with them."
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