CA Technologies' strategy: Can it tackle organic growth?

Jacob Lamm, CA's strategy chief, talks acquisitions, organic growth and the company's cloud strategy.
Written by Larry Dignan, Contributor

CA Technologies reported a strong December quarter and said it would hone its focus on organic growth. The company even put some money---a hefty dividend increase---to ensure that it wouldn't go on a massive acquisition tear.

For CA, a company built via acquisitions, the switch was notable. When it comes to CA, you often think mainframe software and a rollup of disparate acquisitions. As a result, CA's own customer polling three years ago revealed a company that was top three in terms of mission critical, but bottom five when it came to strategic importance.

Related: CA delivers strong Q3, eyes organic growth


CA Technologies' Jacob Lamm

Simply put, CA was all about the plumbing. In the last three years, CA has moved to become more of an engineering-based firm. Not so surprisingly, IBM alums are sprinkled throughout the company.

I continually put CA in the rollup bucket, but thought it was worth hearing about this organic growth version. I caught up with Jacob Lamm, CA's strategy chief, in the CBS Interactive New York office. Here are some of the takeaways from the conversation. Rollup vs. organic growth

Lamm said that CA's legacy for the last 35 years has been rolling up acquisitions. In fact, Lamm was acquired after CA bought his company, Professional Help Desk. After a rough patch from 2000 to 2005, former CA CEO John Swanson moved to turn the company into an engineering-based firm. That approach has continued through today under CEO Bill McCracken. "We were in 28 markets and leaders in very few," said Lamm. "We moved to higher growth markets." Lamm said that CA was basically an IT plumber. The issue? When you're building a house---or technology stack---the high-level conversations happen with the architects.

Lamm indicated that CA is ready to show more organic growth. Its key acquisitions---3Tera and Nimsoft to name two---are complete. Now the company is focused on the cloud and new markets.

Navigating disruption

According to Lamm, the IT industry is entering another phase of disruption. Mainframes gave way to distributed computing because employees wanted instant gratification. CA grabbed a market because its Unicenter software helped CIOs control sprawl. The Internet also disrupted business. Today, employees are using cloud tools whether companies like it or not. "Instant gratification always wins out over control," said Lamm. CA's plan was to bet heavily on cloud management and being a bridge to traditional data centers.

Among its cloud deals, Nimsoft was CA's most notable acquisition. Nimsoft is operated as an independent unit and CA is throwing products its way.

"Nimsoft was built as an alternative to IT management software's big four---CA, BMC, IBM, HP," explained Lamm. It's also worth noting that Nimsoft is a SaaS company. In simplistic terms, Nimsoft could be viewed as CA's lifeboat. In any case, Nimsoft is the future of CA and new customers start with SaaS. Existing customers will expand via SaaS while keeping CA's legacy software.

CA's SaaS plan

Lamm said that CA's SaaS plan is to leverage the Nimsoft platform and move other products on to a single on-demand platform. CA's ServiceDesk software and performance management consoles are delivered via SaaS. "When the industry goes SaaS it will stay there. The trick is not to get caught flatfooted," said Lamm. "Our value proposition to the customer is to be a partner as they move to the next phase of disruption." The purchase of 3Tera---which provides private cloud management in a box---revolves around bridging internal data centers with outside resources.

Moving up the stack

Management software is moving up the priority list for IT buyers and could trump basic ERP apps in terms of importance. Lamm said that "management has always been thought of as a commodity," but now "basic apps are turning into commodities." Once this commoditization plays out, the real value will come from piecing together IT parts faster than your competitors. Gartner gives this building services on the fly a name---DevOps. "If you compare this to the PC market, the shift is like when Dell came along and built PCs faster and cheaper. The value shifted from the components to the supply chain," said Lamm.

"SaaS is the equivalent of the supply chain keeping no inventory," he said. According to Lamm, CIOs will essentially evolve to deliver applications and services---cloud supply chain managers if you will. In this model, CIOs will do more than manage individual pieces. They will be orchestrators for business services and innovation.

M&A strategy

I couldn't help but notice that Lamm talked about organic growth as well as being more strategic and still mentioned a handful of acquisitions. The Wall Street answer is that an acquisition becomes organic after a year. Lamm acknowledged there's no cookie cutter answer for CA. Some tuck-in acquisitions will continue to happen. Nimsoft is more of a platform for the future. CA spent $1.8 billion in acquisitions over the last two years and has its big components for its strategy. Going forward, CA will spend $300 million to $500 million a year on acquisitions. Lamm said that CA is not acquiring companies for revenue anymore and is willing to let the venture capitalists take the risks on developing technologies.

That response is a long-winded way of saying CA doesn't believe it's merely a serial acquirer anymore. However, Lamm acknowledged that "perception lags reality" and CA has to become more strategic "one customer at a time." CA could be in a good position. After all, it has many customers that send checks but haven't dealt with CA for year. Those customers are an opportunity to pitch Lamm's new CA. "We're showing we're not just the mainframe company and building wallet share," said Lamm.


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