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.
How is the new CA different from the old?
It's a hard question for me to answer, from the inside looking out. I think the more important observation is how our customers see the company. I've got anecdotal evidence and experience from the customers I've met that they do see a difference.
The analyst reports that I read would indicate that while we still have a way to go, there's recognition that the company is leaving some aspects of its past behind and really moving forward.
Personally from the inside out, CA is a very different company today... but I think most IT companies are, as well. The challenge for me and the management team in the Asia-Pacific region and Japan is how you embrace the aspects of the new CA, and hang on to what was good about the old CA.
Are there any new areas in your product portfolio that you are moving into?
One of the criticisms of CA is that we've got over 1,200 products, and the portfolio is kind of complex and doesn't make sense to everyone. Over the last few years, you saw a streamlining of the portfolio. And now, Swainson has introduced what I feel is a powerful structure around business units that are self-funding.
The newest of those business units is BSO (business service optimization). It looks at service management and lifecycles in technology investment. The BSO segment is growing faster than the overall IT market. IDC and other market analysts have consistently indicated that BSO in the Asia-Pacific region and Japan have been growing around the 10 percent-range. There's a good opportunity for CA to participate in that growth.
What's the small and medium-sized business (SMB) market like for CA right now?
We've been in the SMB segment for more than 10 years with our BrightStor data backup products and antivirus technology. We are still focused on protecting the data assets on a laptop and in a smaller environment, which is what the SMB market is about. From a growth perspective, we see an upturn in the Asia-Pacific region and Japan, which have the highest number of SMBs in the world.
But we are not losing our head chasing this market…though I stress that we will continue to invest in it. We still have an enormous opportunity to grow in the enterprise space. Market segments such as security, IT governance, network management and storage, are still significant.
How is CA faring in China and Japan?
We've been in China for the last six to seven years with a presence of 140 developers in Beijing, largely in storage technology. We went through a period where we grew quite quickly at first and then hit a plateau. Now, we are in the phase of finding our next growth area there. We put in a new management that is revamping the entire team in China. This market is challenging in many of its dynamics. The sheer scale of the Chinese market means that things, such as systems and network management, are critical and we see lots of opportunities there.
In Japan, to be candid, we are under-penetrated there. We are making a heavy investment now in localization, which is critical to be successful in Japan. Having said that, we have a good business there, but we'd like to see our market share double, or even more, in the next three to five years.