Q&A: CA CEO Gregoire at the one-year mark
Michael Gregoire has been at the helm of CA Technologies for about a year and has delivered solid quarterly results and tried to pivot the company to be more focused on organic development over acquisitions.
Gregoire's background has positioned him well to navigate changing enterprise software models and CA, which specializes in security, infrastructure management and application delivery and performance. Gregoire, a straight shooter, used to be CEO of Taleo, which was acquired by Oracle. Before that Gregoire worked at PeopleSoft and EDS. In other words, he knows both cloud and on-premise software and the revenue models that go with them.
I recently caught up with Gregoire in his New York City office to talk CA's strategy and industry trends. We talked innovation, development, keeping engineering talent and the quickly changing software business model.
Here are the highlights:
The Evolution of Enterprise Software
Organic innovation and intellectual property. Gregoire said that one of his key priorities is to expand organic development and innovation at CA, which has 950 patents and another 750 under review. "We have the IP to do it, but it's a question of how fast can we move and how good the design can be," said Gregoire. "CA got away from organic development and relied on acquisitions for true innovation. You have to have organic development as a software company."
Juicing R&D. When Gregoire restructured CA shortly after taking over about a year ago, much of the effort revolved around retooling R&D. CA went from 80 R&D sites to 40 development hubs and has focused hiring efforts in Silicon Valley, Austin, Framingham, MA, Prague, Long Island, NY and India. "Innovation isn't the problem," said Gregoire. "The ability to focus and create products people want to buy is a different story. It's the ability to see innovation through to a GA product. We didn't have the focus and wherewithal."
What can innovation bring? Gregoire said he had trouble figuring out CA as an outsider before joining the company. He quickly found out that CA is a mission critical company that sells mission critical systems to large companies. The problem? CA's base boils down to the Fortune 500. "We know every CIO and every procurement officer," said Gregoire. "But if no one knows you other than 500 people and you want to grow you can't ignore the broader market." Gregoire pointed to Nimsoft Monitor, a sophisticated cloud system that manages 30 devices for free. "The value of that technology has been brought to the masses and needs a different marketing engine," said Gregoire. The plan for CA is to develop new software that hits smaller companies. Gregoire said that CA "is making progress, but not as fast as I want" and added 150 new customers last quarter and 125 the quarter before.
Engineering talent. Gregoire said that every tech company pays engineers well, but the best way to keep top talent is to put your A+ players on the most interesting things. "And you have to take the stuff that they don't like in the workforce out. Engineers want speed and the most frictionless environment as possible," said Gregoire.
Being involved with product development. Gregoire said his two primary passions are developing engineers and CA's product lines. He acknowledged that some product lines "are getting more attention from me than they'd probably like," but he didn't want to single any one product out. Gregoire said he'll spend time in his home office looking at competitor products. He'll then say to his team: "What's your idea and critical thinking. I don't want to see me too." "When we see great engineering we celebrate it and when we see weak engineering we deal with it directly," he said. As for time management, Gregoire said a CEO has to devote time to the companies core products and talking to customers while minimizing distractions.
Defining CA. Gregoire said that CA historically doesn't talk about what it does very much. "It's almost criminal," he said. "This technology company has to make much louder noise." Gregoire is starting with airport ads with testimonials and marketing messaging. That play is taken right from the Oracle playbook.
SaaS. CA currently has 7 products that are software as a service and Gregoire will grow that roster. However, he said that the more important angle to SaaS is using it as a way to develop software. "Engineered SaaS is just the right way to build software," he said. SaaS development allows the user interface and front end applications to change more rapidly that the back-end and data hierarchy. "SaaS and agile development will be the only way to develop software going forward," said Gregoire. That development approach will be the default in CA even if the software isn't deployed in the cloud.
The 21st Century Data Center
Mainframe innovation. Gregoire sees mainframe products as critical to CA partly because the company has to keep a revenue stream and "reduce shrinkage." CA has to add innovation on mainframe software in order to keep paying maintenance and support. Gregoire also contends that BMC and Compuware aren't investing in the space. "We're still investing in the mainframe," said Gregoire, who touted CA's Chorus software and how it gives mainframe management a real user interface. CA's move to allow tape backups on mainframes to be offloaded to Amazon Web Services is another example of adding features to mainframe management. In addition, the mainframe is interesting because it increasingly runs Java and Linux apps and to a developer isn't much different than programming for cloud computing. "A young turk out of school never know an app was on a mainframe because the traditional interface is abstracted," said Gregoire.
The licensing model. When Gregoire started he went on a tour to talk to customers. Happy customers appreciated how CA's wares managed their critical infrastructure. Worried customers wanted assurances that CA wasn't going to go all cloud and would keep support levels high, maintain account teams and have them call more. Gregoire almost instinctively is wary of large enterprise license agreements given his SaaS background at Taleo. The licensing model means that customers only buy when they renew every three years. The relationship with customers doesn't work as well without more touch points. Meanwhile, negotiations to find value for the vendor and customer get tricky. "The traditional approach is to hang us to the last minutes of the quarter and try to get a better price," said Gregoire. "There's more of a risk for both parties." Gregoire has eliminated enterprise license agreements for some products and clarified buying options. Ultimately, Gregoire argued that SaaS-based pricing just makes more sense. He added that every software company will have to move more toward a subscription approach.
"I've lived in both (software) worlds. I know what a cloud company looks like," said Gregoire, who noted that CA isn't going to cloud wash because customers will migrate at their own pace. "We want to be a long-term solution provider you can count on and will have the absolute best product over time like five years. If something goes bump in the night we will be there."
Mobility. CA sees mobility as a sweet spot for its business. For instance, apps for banking customers will tap into mainframes. That reality will boost MIPs and CA usage. The need to manage identities on mobile devices will also play well with CA's products. And app development and management will also be critical as mobile apps and devices proliferate. "DevOps is huge and no one understands it," said Gregoire. "Mobile is a catalyst for our portfolio."