A software company is facing the challenge of cloud computing – by selling software to manage cloud computing, writes KARLIN LILLINGTONin Las Vegas
ONE OF the world’s largest software companies is confident it can manage the challenges that cloud computing and virtualisation pose to its traditional business model of selling software – by selling software for managing cloud and virtual environments.
At its CA World conference in Las Vegas last week, CA Technologies strongly asserted the way it intended to increase its revenue – which has remained relatively stagnant for several years – is to offer a new range of cloud security and network management software to its customers.
It also said it would embrace the cloud as well, by offering software as a service in some application areas.
Cloud computing refers to the delivery of software services over the web as opposed to customers installing the software on their own computers
During his keynote speech, the company’s new chief executive and executive chairman, IBM veteran Bill McCracken, lays out the new corporate vision and stresses that the information technology sector and the business world generally are undergoing a revolutionary shift.
“I’ve had the opportunity to see every innovation in this industry, and we are at a new inflection point,” he says.
The move to the cloud and to virtualisation was game-changing and inevitable, he argues. Change is being driven by the economy, technology and customer needs.
CA, McCracken says, will help companies weather that transition by supplying the software that lets organisations offer or use cloud services.
For CA Technologies, those capabilities come from a range of recent company acquisitions in the cloud space made by CA, including 3tera, NetQoS and NimSoft.
“We’re expanding what we do and we’re expanding who we are,” McCracken says.
As part of that shift, the company has also announced it will change its name from CA to CA Technologies. Previously called Computer Associates, the company only became CA in 2006 following a corporate makeover in the wake of an executive-level financial scandal that saw CA’s former chief executive Sanjay Kumar jailed for 12 years.
CA Europe chairman and senior vice-president Patrick Starck says the cloud and virtualisation revolution is “evolutionary, not disruptive” for CA itself.
Offering new software and services for a cloud-based approach is “an extension of functionality that we need to cover”, similar to previous computing evolutions such as the move from mainframes to server-based applications.
“At the end, we have storage, networks and services and software on top of it, and that doesn’t change. Our proposition is quite simple – we specialise in infrastructure and we secure and manage it. The essence of our business is to manage complex systems.”
Starck acknowledges that CA Technologies is essentially betting a hoped-for return to growth on its new cloud strategy, but he feels it will succeed for two reasons. Firstly, CA’s traditional client base needs to move to the cloud and CA plans to provide the software that enables those companies to do it. Secondly, CA “can reach a market and companies we can’t today: mid-size companies”, by offering cloud services itself to those companies, or else, cloud management software for more complex third-party applications that mid-size companies can newly afford as a cloud service.
Founded in the 1970s by Charles Wang and Russ Artz, CA Technologies has grown into one of the world’s biggest software companies, supplying big software packages to large enterprises. Most large organisations will be running a CA product somewhere.
George Fischer, CA’s executive vice-president for global sales, describes what CA does as largely “plumbing” – the software behind the scenes in enterprises, managing the network.
The company’s NetQoS acquisition means CA Technologies now has a network security solution that will be essential in providing cloud services, Fischer says. Managing virtualised networks – a “smoking hot” area because companies have much “virtual sprawl that needs management” – is also a new opportunity for CA, he adds.
As for CA’s European business, the European market has been slower to begin to recover than the US market, he notes. Thus Europe provided weak results for CA in the first two quarters “but the last two quarters in Europe were great”, both in services and in new licences.
Revenue is also rising from the public sector in the EMEA market.
Growth in Europe has been such that he has been “aggressively hiring”. More generally, he adds, Europe no longer lags significantly behind the US market as it did a decade ago, and Europe is “more leading edge” in areas like telecommunications.
Fischer argues that the move towards cloud computing will not eat away at CA’s long-time modus operandi of pulling in licence revenue. Many companies will continue to run at least some applications that will need traditional management, but many of these applications will also shift to newer cloud models. Either way, he says, CA plans to offer solutions.
“I don’t see any of the legacy applications going away. I see them being virtualised and optimised.”
In addition, “all this cloud work is driving the workload for the mainframe as well”, a traditional CA market. The company announced major new management software for mainframes at CA World.
McCracken has indicated that CA will continue to look for acquisitions, with up to $500 million available for purchases.
Chief technology officer Don Ferguson notes that CA did not so much acquire companies as new technologies that fitted into the company’s overall strategy. “In the last six to 12 months, we have focused on small companies with an outstanding technology.”
At the moment, CA is primarily interested in acquisitions that will fill gaps in its ability to either manage or secure networks, he says.
The company also develops technologies in-house, but will opt for acquisitions if they are a faster and more cost-effective way of expanding the company’s portfolio of products.
Ferguson says many of CA’s products rank well with industry analysts and the challenge for the company is to show it can successfully execute its new strategy and grow sales and services.
“It’s all on a day-to-day basis, how you listen to and serve your market.”
