CA'S CEO Dilemma: Customers Like The Guy

Computer Associates' removal last week of Sanjay Kumar as the company's chairman and CEO does more than put a big hole in the executive ranks. It removes what for many CA customers has been a friendly face on the once-antagonistic software company.

CA board member Kenneth Cron has accepted the interim CEO job, a move CA will announce as soon as this week, sources told CRN, a sister publication to InformationWeek, last week. Cron is former CEO of Vivendi Universal Games and former president of CMP Media, of which InformationWeek is a part.

CA's board moved Kumar to the as-yet-undefined role of chief software architect in the fallout from a two-year accounting-fraud investigation by the Securities and Exchange Commission and the Department of Justice. Nine employees were fired last week in connection with the investigation.

James Barry, CIO of OneUnited Bank, says that before Kumar took the helm in July 2000, CA was "impossible to deal with." While working at another company, Barry refused to consider CA for a $1 million software contract because of its hardball tactics. "They alienated me in the sales process," he says.

In 2001, Kumar and CA won Barry over with steps such as making changes in its portal software to meet the bank's specific needs. Today OneUnited uses CA's portal and data-storage-management products.

HIP Health Plan of New York spends millions of dollars a year on CA products, and Pedro Villalba, senior VP and chief technology officer, thinks the vendor was at last headed in the right direction. "Sanjay put a lot of energy into improving customer service," Villalba says. "I've seen nothing but improvement over the last three years. I'm just hoping somebody will carry that forth."

Although dominant in the mainframe-management software market for years, Computer Associates under Kumar "stopped treating customers like captured prisoners," Merrill Lynch analyst Jason Maynard says. "I don't think they've convinced everybody that has been left with a bad taste in their mouth, but I believe they've made positive changes in how they sell, support, and maintain relationships with customers."

Earlier this month, Ira Zar, the company's former CFO, pleaded guilty to fraud and obstruction charges. He has been working with investigators and has said two other senior executives conspired with him to manipulate earnings statements.

Analyst Maynard worries that Kumar's remaining at the company could be a problem. "Whoever becomes CEO should have the opportunity to run the company without anyone lurking in the shadows," he says.

Even with Cron as interim CEO, there's no clear-cut heir apparent to Kumar. Executives include Jeff Clarke, who became CFO this month and previously was CFO of Compaq and executive VP of operations at Hewlett-Packard, and Mark Barrenechea, senior VP of product development at CA since June and former senior VP and executive committee member at Oracle. Board member Lewis Ranieri, a founder of Hyperion Partners L.P., was named chairman. Says Maynard: "My bet on the eventual CEO is that they bring in somebody from the outside that has a pretty golden reputation that can be an ambassador of goodwill and change."