With the fun and games behind them (CA World ’15), CA Technologies has to get back to the work at hand, continuing its reinvention. The software giant is pinning its future on where the market is going — variously tagged as the digital economy and the API/business as software worlds — while chained to its very profitable, if more slowly growing (or slowly declining), mainframe (over 50% of company revenues), management and security software roots. It’s a monumental task: can CA sell enough product and services to its new opportunities (which grew more than 40% year-over-year last quarter), while keeping its mature business moving forward, albeit at a snail’s pace (overall revenues continued to decline and share prices are anemic), and stave off the possibility of shareholders looking for more value, and/or potential acquirers?
CA has made great progress in its offerings, but they are not satisfied, said CEO Mike Gregoire in his opening keynote to 5,000 customers plus assorted partners and staff. “We are committed to raising our game. There is no finish line in customer service.”
I asked analyst Joe Clabby, Clabby Analytics, what CA got right at this year’s event, and what they need to do moving forward. He said they stuck to the messages that they came out with last year on application development the application economy, DevOps, management, agile, etc. and “showed solid progress” in all of those areas (including customer case studies).
“They appear to me to have a solid strategy, and they’re executing well. Gregoire has revamped the salesforce, made his workforce more efficient, and is well-prepared for growth. The financial analyst who sat behind me on day one has even issued a strong buy recommendation.”
As for what remains undone for CA is getting more analytics into their management offerings. “Here’s the deal: they collect tons and tons of big data information about the health of systems, on applications behavior and the like. They then turn all of that data over to humans to figure out what to do with it. They need to get analytics programs in place that will help sort through that data, making it easier to do root cause analysis and fix things. They have a few products that do analytics on the data that they capture, they need a lot more.”
The company is moving as quickly as possible down the “agile” path, and its 4,000 software developers all being trained in agile, said Gregoire. “Within one year, my expectation is everybody in the company, especially on the development side, will be proficient.”
He expects this to be reflected positively in their products, although with caveats. “Like we always do with software, we will overpromise and underdeliver.”
Everybody is moving to analytics, including cognitive and machine learning, and while that’s predominantly in CA’s labs, they will be a big part of their future going forward. “I think we have a very strong future ahead of us”, said Gregoire. “We are a very stable company… I think we are a very competitive vendor”.
In case there was any doubt about where the market is moving, CA released a new study: Surviving Disruption, Leading Change: Winning in the Application Economy. More than half of those surveyed (58%) envision having significantly different business models in three years, said Otto Berkes, CTO, CA. “That’s an incredibly ambitious objective.”
The key drivers of disruption are customer behaviors and expectations. “The bar is much higher, much different from in the past.”
There are new competitors with disruptive technology, and a key theme of this is the need for speed. “The lack of speed is inherently a limiting factor.”
In addition to lack of speed/too much bureaucracy (46%), the other top obstacles are culture resistant to change (31%) and outdated technology (27%). From an investment perspective, the top priority is delivering the digital customer experience (42%). “That is the game itself.”
The next two concerns are: transformation to core business operations/processes (34%); and, transformation to employee work processes (31%).
Agile and API/business as software may be CA’s future, but the mainframe is its legacy, and still dominant business. And despite the “noise” that the mainframe is dead, its current market and prospects are much stronger than many believe, said CA’s David Hodgson, Acting GM, Mainframe Business Unit.
He said the market statistics are misleading because they primarily focus on IBM’s zOS operating system. That’s a healthy segment for CA, representing a couple of hundred customers, and growing.
However, there is “huge growth and huge potential growth of Linux on the mainframe.” Unfortunately, at the moment there is no way to really count that in mainframe sales, said Hodgson.” There is definitely a swingback to the mainframe being considered now.” It’s about workloads…”and the mainframe is back in the conversation.”
CA has a lot of work ahead to complete its metamorphosis, but there has been solid progress. As Gregoire noted, this year’s event saw a 25% increase in customer attendance, and almost half of that increase (45%) represented new customers.