Inside Computer Associates: A vendor dossier

Software giant Computer Associates, like many companies in the tech space, has enjoyed mixed fortunes in recent years. Last year's management coup and talk of accounting scandal spiced up its steady exit from the downturn but with its infamous acquisition streak fading, what is there left now to say about CA? Will Sturgeon joined the company in Las Vegas to find out...

I arrived in Las Vegas late on the Friday night. By the time I reached Chicago from Heathrow to transfer onto an internal flight I was already getting a sense of the size of CA World 2003 - the annual shindig for Computer Associates where they beat their chests and evangelise about the quality of their products.

I got the distinct impression that the immigration officer at Chicago O'Hare Airport had only heard one thing all day from the folks passing through his terminal.

"Let me guess, you're here for CA World right?"

I was still more than 1,000 miles away but word was obviously out that the techies were in town on their way to Sin City.

CA was unofficially estimating as many as 30,000 attendees - including analysts, press and employees - might make the annual pilgrimage. Staging it in Las Vegas probably helped boost enthusiasm but for staff to make the trip - many of whom I'm told did so at their own expense - is still a great show of loyalty in these downbeat times.

This is nothing new in US big business but when a company is made up of such a mix of all-comers - remember CA is a patchwork firm which consists of multiple companies thrown together through acquisition - it is worth remarking on.

During his keynote speech on the Sunday, and again during a question and answer session with the press, CEO Sanjay Kumar made a number of references to this acquisition spree during the eighties and nineties which created the company we see today. Kumar himself was among the assets stripped from UCCEL Corporation in 1987, where he was a director of software development.

Kumar became CEO in August 2000 and took on the roll of chairman in November 2002, when founder Charles Wang stepped down. A number of the current board also joined the company as the result of acquisition. Yogesh Gupta, the company's influential CTO, joined CA in 1989 through the acquisition of Cullinet Software.

However, the days of acquisition are apparently in the past - though that claim comes with an important 'never say never' caveat.

Kumar has ruled out all but the most strategic of purchases, confidently asserting that CA is now fit to stand and thrive on its own two feet and claiming that the rest of the industry is now playing catch-up in terms of acquisition and consolidation.

But even without acquisitions to occupy the mind, life at CA has certainly been far from dull over the past 18 months, with a failed management coup that descended into name-calling and an SEC hearing just two of the more notable highlights. (Still, you were nobody during the post Enron-days of 2002 if you weren't investigated by the SEC).

And the company's share price has certainly mirrored the rollercoaster ride of the late-nineties and early-noughties. At their peak in 1999 the shares were tipping the scales at $75. In the wake of Sam Wyly's management coup and the announcement of the SEC investigation they were down under $10 and today they are hovering around the low-twenties on their way back towards more rarefied air. When plotted, the fluctuating share price looks like a big dipper that would satisfy even the most extreme Vegas thrill-seeker.

So what now for the company as it looks to grow on merit, rather than through acquisition?

Its newfound reliance upon managed service models rather than good old fashioned products in a box, suggests it is looking to realise the value from its existing customer base - adding layers of must-have management on top of current product offerings, as seen with its managed security services such as the Security Command Center, where it is pulling together customers' existing multi-vendor security solutions under one umbrella app.

But Una O'Neill, VP and general manager, refuses to concede that the doors are closed to news customers.

"We very much have a two-pronged approach," she said. "We are definitely looking at working more closely with our installed customer base but we are absolutely about trying to grow and bring in new customers. We are moving more into small and medium-sized businesses which is an area where we have not been active previously."

Just this week CA announced a move into the SME market with a network-attached storage (NAS) product released in association with Iomega, which is also typical of CA's partnership approach. In this instance Iomega produces the kit and CA installs the storage and security management software which it ships with.

This shift in emphasis, away from its major-contract enterprise roots, could do wonders for CA's public image. Previously it has been an unsung titan of the enterprise sector but while most people are aware of the scale of the company it still doesn't enjoy the level of brand recognition of other, often smaller, companies who are banging the drum in the SME marketplace.

Being big in enterprise is not always synonymous with enjoying a high public profile - companies tend to target their approaches with precision as opposed to the scatter gun approach of blanket bombing small businesses and consumers with advertising.

In the security market for example CA's eTrust division doesn't enjoy the notoriety of other players - even though its market share may give it little cause for concern.

Nobody here at CA World would admit the company has spread itself too thinly over the past 15 years of acquisition after acquisition. But a concerted effort in terms of promotion - CA has signed off a number of major advertising deals already this year - suggests the company is not oblivious to its comparative short fall in status. The scale of this ad spend is unknown - the company would not be drawn on the actual sums involved.

CA's diverse software offering mirrors its patchwork of staff. The acquisitions not only brought a variety of different skills through the doors they also brought a variety of products under a confusing array of brands.

The six areas are: Advantage (database management and application development), Allfusion (application life cycle management), Brightstor (storage and back-up), CleverPath (portal and business intelligence software), eTrust (security) and Unicenter (enterprise management - where CA has made the biggest part of its money in recent years).

Such diversity may lead to confusion but it has also made CA recession proof to an extent. While some areas have taken a real kicking in the past three years there have invariably been others acting as a crutch upon which CA could hobble through the downturn.

This is certainly true of network management, security and storage, where CA is very strong. These areas have been perennial favourites when it comes to drawing up IT budgets, even throughout the lean times of the past three years.

And looking forward, CA is insistent it will be up with the front-runners as new technologies emerge and become market favourites. Predicting these trends and positioning the company to profit from them must now take precedent over letting others spot the trends and then buying them.

"Flexibility, flexibility, flexibility" is Kumar's mantra - and a bullish move into on-demand and utility computing is in keeping with that refrain. He is insistent that is 'where it's at' for 2003 and 2004 and CA is setting out its stall aggressively in this sector - boldly dismissing the challenge of IBM in the process (something which should never be done lightly, lest it comes back to haunt you).

In April 2003, CA unveiled a whole host of on-demand initiatives under its UniCenter brand. Similar on-demand moves have been made across the rest of its range. It is an issue which CA is allying itself with, with apparently no reservations.

Kumar predicts companies that cannot offer scaleable, flexible solutions will go out of business, and that's not an option for CA.

At the moment this bullishness appears well-placed. CA's first quarter results for fiscal 2004 surprised everybody and have set the company up in fine style for continued growth throughout the year. The company eclipsed expectations and continues to show steady movement away from the nadir of the downturn.

This current run of form should certainly make it easier for Kumar to keep his word and leave the cheque book locked up in his desk drawer.