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11/24/2004
07:15 PM
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Outsider On Top

Computer Associates' CEO-elect must reconcile product strategy and customer satisfaction

In a speech a few years ago in Miami, IBM veteran John Swainson invoked Hunter S. Thompson's 1967 book Hell's Angels to make the point that IT professionals weren't unlike motorcycle riders in their need to navigate the winding road ahead. "Lean into the future and push the technology envelope," Swainson said, adding: "Nothing ventured means nothing gained."

Swainson took his own risky step into the counterculture of the software industry last week when he was named to become the next CEO of Computer Associates. After 26 years in the relative calm of IBM, Swainson will take the helm of a company that's just emerging from a federal investigation into its accounting practices and whose former CEO, Sanjay Kumar, was indicted on charges of fraud in September, following the indictments of several other former executives. "I'm here to transform the business and change it into something else," Swainson says.

''I'm going to spend a lot of time listening to our customers,'' says John Swainson, Computer Associates' next chief executive.

I'm going to spend a lot of time listening to our customers,'' says John Swainson, Computer Associates' next chief executive.
Until last week, Swainson was VP of IBM's worldwide software sales organization, and, before that, general manager of the company's application and integration middleware division, which launched the industry-leading WebSphere application-server line. For the next few months, he will report to Ken Cron, the board member who's been filling in as interim CEO while Computer Associates searched for a replacement for Kumar.

Swainson has a reputation for being good with customers and for understanding how business technology gets applied within companies, which will serve him well at Computer Associates, says Merrill Lynch analyst Jason Maynard. Adds CA customer James Barry, CIO at OneUnited Bank: "It will help lead them out of a difficult period and let them put it behind them."

However, some customers are anxious to know how things might change, particularly in terms of CA's extensive product portfolio. Wayne Roberts, VP of information services operations at Blue Cross Blue Shield of South Carolina, wants to know "what the main products will be and where they're going." Mohamad Alkazaz, IT and telecommunications manager at Saint-Gobain Crystals, has some advice for Swainson: "Keep us customers more aware of what's going on, because when I know the vendor will continue to support a working product, it helps me stay with it, instead of turning to a competitor."

Phil Sitsis, manager of information systems at Siemens Medical Solutions, a unit of Siemens AG, says CA might benefit from focusing its development and sales efforts on fewer products. Swainson seems to agree. "It just isn't realistic to think that 500 products can be strategic," Swainson says. He plans to spend the next few months determining which products get continued investment from CA's $640 million research-and-development budget and which are put into maintenance mode.

Computer Associates projects revenue of $3.4 billion in its current fiscal year, compared with $3.3 billion in fiscal 2004. Swainson is promising to get the growth engine revved up fast. "Speed is of the essence here," he says. "You should see it manifest in many ways--in the attitude of the company, in getting new products out the door, the speed at which we enter adjacent markets, acquisitions. You're going to see us crank it up."

Computer Associates has grown aggressively through acquisitions in the past, and, in a call with analysts last week, Swainson pointed to the company's recent purchases of anti-spyware developer PestPatrol Inc. and identity-management specialist Netegrity Inc. as examples of how CA can continue to strengthen its product line.

Swainson plans to spend much of December meeting with customers and the next few months mapping out a product strategy before taking over the business from Cron. "You'll see more emphasis on an integrated security story, more emphasis on the core strength of the business, which is systems management, and on [application] life-cycle management," he says.

In addition to Swainson, Computer Associates has brought in several outsiders to help stabilize the company, including Jeff Clarke, chief operating officer and CFO, who joined CA in April from Hewlett-Packard. Swainson's goal is to transform the company's culture from what he describes as a "founder-owned business to one of a more modern publicly owned corporation."

The management team has work to do repairing customer relationships. Kumar was credited with improving Computer Associates' hard-charging reputation of the past, but that work isn't over "by any stretch," says Merrill Lynch analyst Maynard. According to an InformationWeek Research survey earlier this year of 62 of CA's customers, only one-third indicated they were "extremely satisfied" with the company's products and services; half were "somewhat satisfied"; and 20% "not at all."

Swainson acknowledges the need for improvement. "I'm going to spend a lot of time listening to our customers and channel partners to make sure I understand what they need us as a partner to do for them," he says. "I'm not [convinced] that customers think of me as a strategic partner today. I think they think of [CA] as a necessary evil."

-- With Martin J. Garvey and Paul Travis

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