The enterprise software company has been striving to address industry critics, focusing especially to rebuild its relationship with its customers.
Undeterred, CA will continue to satisfy its acquisitive hunger which will allow the company to enhance its product portfolios, said John Ruthven, CA's senior vice president for sales in Asia-Pacific and Japan.
Ruthven gave ZDNet Asia a heads-up on where the company is heading in the region, and the reason behind its decision to merge the Asia-Pacific region, Japan and Oceania into a single business unit.
Q: What's the rational for merging the Asia-Pacific region, Japan and Oceania into a single business unit or geographical organization (GO)?
A: It's for commercial convenience. Globally, we operate in four geographies--North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia-Pacific Japan. It's not a model that's uncommon in an IT company. That consolidation (of the Asia-Pacific region, Japan and Oceania) gives us the opportunity to put scale into our business, and allows us to run campaigns, programs and customer initiatives, as opposed to doing it on a country level.
How is efficiency derived from such a move?
What we’ve endeavored to do on a country level is to remain intimately engaged with the customers and various business imperatives. There are some overarching imperatives such as IT governance, security and the search for efficiency.
Each country has its own challenges such as the stability of its economy, so we've put (together) a management team that provides us with campaign assistance and to train and develop our people--that's where we get the efficiency. When it comes to field execution, however, we want to maintain the local approach that's driven by the people in that market.
Asia is a diverse place made of countries that are unique in their own ways. How do you maintain synergy between the various countries?
It’s not an easy task. Some countries in the Asia-Pacific region and Japan have low levels of revenues. We also have countries with mature businesses that are generating good cash flows with a stable and satisfied customer base.
The challenge is making sure that you are offering the right solutions to the right market. Commercial consideration is important, and we know that pricing expectations in certain markets are largely to do with whether they are emerging or mature. We ensure that the local management understands those challenges.
(CEO) John Swainson said he's not satisfied with CA's relationship with customers. Where does that relationship stand now, and where is it heading? It's hard to quantify where it stands today, but I can clearly say that I'm not satisfied with where we are now. Still, there are dramatic improvements in some areas.
As a company we didn't always manage our customer relationships as well as we could. It's one of those things where you can never rest on your laurels and say you've got it right. John Swainson and the executive team are very committed to building good customer relationships.
CA has been criticized for its lack of innovation as it has been expanding only through many acquisitions. What are your thoughts?
We have been acquisitive and will continue to be. I think the drive at the moment in the IT industry is consolidation. So, at a commercial level, you either play the game and be a consolidator, or become consolidated.
CA generates about US$1.4 billion of free cash flow, which you can do three things with: pay your debts, give it back to the shareholders or buy (companies). What we are doing now is to make targeted strategic acquisitions to build a portfolio that's focused on managing the IT environment, security, storage management and business service optimization. Under those four business units, you will continue to see us building up our portfolio.
I won't argue about the point of CA not being innovative. I will argue that CA has balanced its own internal organic development and innovation with strategic acquisitions.
Analysts have questioned the prospects of CA's growth, according to a New York Times report. The company has projected a revenue growth of 7 to 10 per cent in the next fiscal year. However, the acquisitions of Concord and Netegrity will account for 5 per cent of revenues, which leaves internal growth to between 2 to 5 percent. Any thoughts?
John Swainson is on record to say that we are looking for high single-digit or 10 per cent growth, and half of that will be through organic growth and the other half through acquisitions. The acquisitions you see and the effort in this part of the world is to live up to that promise of ensuring there is organic growth.
Would you say that IT companies have no choice but to acquire smaller players that offer niche technologies, which could then be pushed out to channel partners for faster growth in the long term?
If you take a macro view of the IT industry, my point about consolidation remains valid. The industry has a plethora of small companies because the barrier to entry, particularly in software, is low. You still have the opportunity for someone with a bright idea to develop code in the garage, literally.
But it also occurs at a time when customers are demanding to have their IT strategies backed by big credible vendors. They want to know that those vendors are going to be around for a long time. They want to know that the technology investments they make are sound and well-supported. Something that people often miss with strategic acquisitions is that they (acquisitions) are very good for customers in many ways.
To CA's existing customers, the Unicenter portfolio, for example, would be significantly enhanced with the Concord acquisition. Customers who have licensed existing (Concord) technology will now have their products enhanced by the integration of some aspects of Concord technology. We will, and we’ve publicly said this, make available standalone products from the Concord portfolio. But where appropriate, we'll integrate certain aspects of it into core Unicenter technology.
From a customer standpoint, acquisitions are in many cases very good for the lifecycle of a technology. The fact that the industry is consolidating is not something that CA is driving. Rather, it's something we choose to participate in--to be a consolidator.