In-Depth

Changing Times at CA

Does grey knight CA—“the industry’s safety net”—have a new set of priorities?

• By Stephen Swoyer
• 12/13/2005

For most of its history, Computer Associates International Inc. (CA) has been a somewhat unlikely grey knight, riding in to “rescue” floundering companies that might otherwise have gone under, leaving their customers high and dry.

Recently, CA seems to have charted a new course. At its recent CA World user confab last month, for example, Islandia, NY-based CA outlined an ambitious new product alignment and packaging strategy, dubbed Enterprise IT Management (EITM). EITM brings order to CA’s often confusing (and overlapping) portfolio of systems management, enterprise storage, and security management product offerings. It also consolidates many of these products—26 in all, CA officials say—into a giant branded product family. CA officials promise that EITM will up the ante even more: There’s already substantial integration between and among its constitutive products, but in future revisions, CA expects to tighten integration even more.

Make no mistake about it: CA has always been a systems, storage, and network management powerhouse, and over the last few years in particular the company has articulated a compelling security-management strategy, too. But CA has also weathered a number of hugely disruptive changes over the last half-decade, starting first and foremost with the departure of key executives (amid the taint of financial scandal). In this respect, there’s a sense that the company’s recent moves—including last month's divestiture of its Ingres relational database assets—constitute a change of course for the enterprise software giant.

CA officials, for the most part, say it’s business as usual. “This is part of a significant undertaking to spend time with as many clients and prospective clients as we could to understand the sets of issues that they’re dealing with. Consistently, we have heard them stress four key needs: they want to be able to better manage risk, improve service, better manage cost, and align all IT elements with the needs of their businesses,” says Nigel Turner, senior vice-president of EITM with CA. “The development we’ve been doing for the last two years has been to address those needs, and we’re going to continue to enhance [the EITM products] to address these [needs].”

Goodbye Grey Knight CA?

Sometimes when a company was in trouble—e.g., stagnant revenues, innovation in limbo, general uncertainty about the future, and so on—CA would step in, buy it, and add it to its ever-expanding portfolio of once-, twice-, or thrice-owned technology assets. The company’s actions couldn’t exactly be called philanthropic, of course—CA typically snapped up established vendors with reliable streams of maintenance revenue. They did, however, have an undeniable upside: as far as users were concerned, CA gave them a place to turn for maintenance, support, and—in many cases—sporadic product enhancements.

Now, says one long-time industry watcher, grey knight CA—aka, “the industry’s safety net”—has a new set of priorities.

Allegations of accounting irregularities, an SEC investigation, and criminal charges against prominent former executives have tarnished the reputation of the Islandia, N.Y.-based software giant.

“CA’s historic business model was to acquire problem companies, drastically reduce their staff, and curtail product enhancements while providing sufficient maintenance and support [e.g., support for new versions of operating systems] to keep the acquired products alive and the maintenance revenue stream flowing into its coffers,” says Mike Schiff, a former MIS director, and a veteran of Digital Equipment Corp., Software AG and Oracle Corp.

Schiff, who now heads up MAS Strategies, a data warehousing and business intelligence (BI) consultancy based in Reston, Va., says there was an important upside to this business model. “Over the years, CA earned a reputation as the place where companies that are having financial difficulties go to get absorbed lest their products disappear completely.”

The company’s MO was notorious—so much so, says Schiff, that employees of potential acquisition targets sometimes had CA-specific clauses written into their contracts. “These were clauses that if CA bought the company they could get out of the contract. [CA] had a reputation that the first day after an acquisition, they would lay off half the staff. They could afford to do that because they were feeding off the maintenance revenue,” he comments.

It’s easy to position CA as a predatory giant, but—by the same token—the company did perform a service for users that would otherwise have been left high and dry by the demise of struggling application vendors. “By continuing to support the acquired technology, albeit sometimes at a subsistence level, CA provided IT organizations with the time they needed to migrate their companies to alternative offerings,” Schiff argues. “Were it not for CA, many products would have simply disappeared along with the technology investments of the companies that licensed these products.”

The Rebirth of CA

Whatever you might think of CA’s grey knight history, officials such as Turner say things are different in Islandia these days. “We’re totally focused on the area of management now, especially as it relates to leveraging all of our traditional management capabilities and aligning them to the way customers need to manage their businesses,” he notes.

Turner refrains from revisiting the strategy behind CA’s past acquisitions. “I can’t really speak to the motivations for these. All I can really speak to is the ones we’ve made recently,” he says, referring to a quartet of acquisitions—including those of e-mail archiving vendor iLumin and identity-management specialist Netegrity—that CA has made over the last 13 months. “It’s clearly because we believe [these acquired companies are] strategic technologies for us. Each of these has either extended our coverage or filled a gap where we weren’t particularly strong.”

Turner won’t rule out additional acquisition activity, but says CA is most interested in complementing or augmenting its core technology competencies. “If there’s technology out there that is leading edge or close to leading edge that will give us a piece of functionality more rapidly or more cost effectively than developing it ourselves, it’s the obvious decision for us to make,” he indicates.

As for CA divesting itself of other legacy products that, like Ingres, might not jibe with its EITM focus, Turner says he isn’t aware of any plans to do so. “I’m not aware of any others that we’re even thinking about doing that with.”

But Schiff thinks it’s all but a no-brainer for CA to do just that.

“I think they’re going to do more things like this. They’ve literally got hundreds of products that they have acquired over the years. Hundreds of them. Some of them just get bought and then they disappear. So it seems likely that they’re going to take a look at [CA’s application portfolio] and see if there aren’t other [products or technologies] they can thin out.”