6 Questions With CA CEO John Swainson

With about $4.5 billion annual revenue, CA sells enterprise software to manage and secure the IT systems of large companies, competing with companies such as Hewlett-Packard, IBM, and BMC.

John Swainson, CA's CEO since 2005, recently met with InformationWeek editor-in-chief Rob Preston and editor Chris Murphy. Here are excerpts from the discussion.

InformationWeek: Are CIOs thinking in the terms of having to move money out of the 80%/70% bucket for ongoing IT, and into the 20%/30% bucket for new projects?

Swainson: Absolutely. And it takes a bunch of different forms. You hear people talk about needing to get higher server utilization, with virtualization perhaps a tool to do that. You hear people talk about needing to get more automation of the data center processes, and tools like ours being a vehicle to do that. But there's generally a recognition that we aren't very efficient in the way we use the investment in IT, in particular the investment we make in IT operations. It takes too many people to still run IT. It's a fact.

The IT processes haven't been automated nearly as well as they might have. And that's an indictment of the entire industry, including my piece of it. The tools haven't delivered always on the promise they should've. Customers have been siloed about their development and haven't thought end to end. ... In this environment, when there isn't enough money to go around, they're having to look hard at how do we squeeze more money out of it.

InformationWeek: Are companies really making hard decisions, and not just nip and tuck?

Swainson: More than ever. Some of these decisions are hard because they imply turning upside down years of established practice. Some of them are hard because the end result is you're going to lay off a bunch of people. It's always hard to go into that kind of process when the outcome isn't necessarily the same people being in the same chairs. InformationWeek: Are you seeing a lot of IT-driven innovation these days?

Swainson: IT departments are clearly doing less innovation now than they were a few quarters ago, because they've been told to pull back from new things, because they have to keep the old stuff going, they have to comply with regulations, and there's obviously things that are of great importance to the business they have to keep focusing on.

So innovation is probably reduced because it's being squeezed a bit by the fixed costs to keep the engine running and the reduced budgets people have. That being said, the only source of new money for innovation people see is finding ways to be more efficient -- be leaner in terms of how they run their infrastructure.

One of the things when we look back is we saw IT-based innovation to some extent outrun companies' ability to govern and manage it. And I'm thinking about financial services when I say that, and some of the products they created. Clearly one of the things that happened was no one really understood the consequences of all of these derivatives and CDOs and the second and third derivatives of these things that ended up getting put together. Clearly, there was not a good way for boards of directors and risk committees to see the consequences of what they were doing.

They wouldn't have done it otherwise. You hear these conversations in Congress and the like about greedy bankers. These guys aren't stupid; they're not trying to blow their jobs up. I think they just didn't know what the consequences of the technology-driven products were.

So the message there is you've always got to keep a balance between how you innovate in terms of new products and services with IT, and the ability to manage, report on, and govern them. ... It's very clear that on a couple of those dimensions, people were building applications that either they couldn't govern or couldn't manage. And in some cases, they couldn't secure them, either. I think the lesson we're all learning out of this is that untrammeled innovation without the right balance around it, leads to bad things. It doesn't have a happy ending. InformationWeek: Where does CA fit in the cloud?

Swainson: If you're sitting in the middle of the enterprise, and you want to have applications living in the internal and external cloud, how are you going to manage them, how are you going to provide a consistent level of service, how are you going to federate the security process? It's a dream come true if you're in my business. The more you add complexity, the more you add network connections, the more you need technology to manage it. It's a wonderful thing.

... You want the user experience to be simple. With that simplicity, there may come a much more complex operating environment. And you need that operating environment to be automated, if you're not going to have an army of people to manage it. And you reach a point, actually, where even an army of people doesn't work anyway, because the complexity of the environment defies manual intervention.

InformationWeek: Three years ago, CA was looking at midsize, maximum a $100 million [revenue] kind of acquisition targets. Has the focus changed?

Swainson: Since 2007, we haven't done many acquisitions. We've done a few technology tuck-ins, maybe half a dozen or less. We found that valuations got out of control, and frankly we needed to integrate our solutions that we'd organically developed and acquired, to provide a more cohesive story to our customers. So we backed off.

We're now more open to acquisitions. I don't think we've changed what we find our sweet spot to be. If I look back over CA's whole history, the best acquisitions we've done are Wily and Concord and Niku and Netegrity. Those four all were in the size you describe. They were all leaders in their technology space but were kind of boxed in -- in some cases couldn't expand internationally, or they couldn't invest enough in R&D to take their technology to the next level.

Wily is probably my favorite case. Wily had when we bought it something like $60 million of total company revenue, and maybe half of that were licenses. And we've more than quadrupled that in the course of the last few years. ... That's the model I'd like to replicate. InformationWeek: Can you stay independent?

Swainson: I think so. We're $4.5 billion, roughly. We spend $600 million-odd on R&D. We said this year we're going to do between $300million and $500 million in acquisitions. So we're big enough to keep current on the technologies, to support our customers in roughly 40 countries around the world, and there's enough opportunity to stay in our space for as long as I can possibly see. I'd give you a different answer frankly if I thought the space was contracting, but it's not. Or if I didn't see opportunity, we'd then have to branch out. But I don't see any need to do that.

And I think the industry really does need it, as it's developing more and more toward these integrated giants -- you're going to have Cisco, you're going to have HP, you're going to have IBM, and you're going to have Sun-Oracle, and I guess Dell in some role, too. So you're going to have these four or maybe five integrated giants in the data center, who's going to focus on pulling all this stuff together? They're not going to. They all focus on themselves.

The systems people run don't just live in one tower. You see this every day. They're spread across a hybrid of systems, and the world's becoming more hybridized, it's becoming more heterogeneous. As long as that continues to happen, there's a good role for someone to be the Switzerland.

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