IT Industry Can Weather Economic Slowdown, Says BMC CEO

The IT industry won't be immune from an economic slowdown or recession. But BMC Software president and CEO Bob Beauchamp believes demand for information technology products and services will hold up better this year than in the last industry slowdown during the dot-com crash and recession of 2001.

Beauchamp expressed his views in an interview Friday following the release of BMC's third-quarter financial results late Thursday. The company reported strong growth in sales and earnings for the quarter ended Dec. 31, 2007.

While some customers of Houston-based BMC have indicated they may trim their IT budgets somewhat, Beauchamp said there have been no signs of customers canceling, delaying or shrinking projects to implement BMC's enterprise management and IT automation software. For the third quarter BMC reported sales of $459 million, up 11 percent from the same period one year ago. License revenue, a key growth indicator, grew 17 percent year-over-year to $182 million.

During the dot-com boom of the late 1990s many businesses spent huge sums building up IT capacity in anticipation of growth generated by the Internet economy. When the recession hit, companies had more computer hardware, software, network capacity and storage systems than they needed and IT spending slowed markedly.

"What we saw was a huge excess [IT] capacity bubble. That's not the case today," Beauchamp said. Businesses in recent years have been buying what IT they need and don't have unused equipment sitting around. So companies have to expand their IT systems to accommodate even low rates of growth.

Beauchamp also argues that products such as BMC's, that help automate IT processes, and the business processes they control, are in demand as businesses try to lower costs. "This is the decade IT automates itself," the CEO said. In 2001 many companies cut IT labor costs by sending work to India and other offshore locations. But there are few opportunities to cut costs further by outsourcing additional work overseas. "That card's been played," Beauchamp said.

BMC, which relies on channel partners for about 40 percent of its sales, itself has been running a very cost-effective business: Net earnings in the third quarter were $89.4 million, up nearly 40% from the same period one year ago. Beauchamp said the company's operating margin was 30% for the quarter.

For the current quarter the company expects sales in the range of $450 million to $465 million.