CA's New CEO Knows What He Needs To Do

Though just appointed president and CEO-elect of Computer Associates International, John Swainson already has a strong sense of what he needs to accomplish. Swainson, who last month left IBM to join CA, and Gary Quinn, CA's executive vice president for partner advocacy, talk about how CA's product plans will evolve and the channel's expanded role in the Islandia, N.Y., software vendor's overall strategy in an interview with CRN Editor In Chief Michael Vizard, News Editor Steve Burke and Senior Editor Dan Neel.

CRN: After a long career at IBM, what motivated you to take on this role at CA?

SWAINSON: The opportunity to lead one of the leading software businesses in the world was what attracted me. I'd been the No. 2 guy at IBM Software for years and done a lot of different jobs there. I had a great time and a great career, and I loved doing it. But I wasn't going to run IBM, and it wasn't clear if and when I was going to run IBM Software. So this represented an opportunity to provide leadership in a broader, more public sense. And, frankly, the more I came to understand about CA and its prospects, the more excited I became about the potential.

CRN: What do you see as CA's strong suit going forward?

SWAINSON: The potential to take this from a good company to a great company. There are two pillars that we're going to try and build the business on: security and systems management in the enterprise. That's our core base of strength today. Those are the things on which we build. We just have to make sure that our position in those areas is unassailable. Around that, then there are some very interesting market opportunities. Clearly, we're starting to investigate the whole area of risk compliance. Risk and compliance is all about securely managing your systems.

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CRN: Where does storage play in that vision?

SWAINSON: Storage backup, per se, is an important part of the portfolio. The linkage to storage as one of the things you manage is very important. But the backup and restore piece of this is a commodity. It's not where the strategic vision is going to lead us. I think we're going to focus on storage as part of the overall enterprise systems-management piece, not just on storage as a stand-alone product. Clearly, I'm not starting on the path of spinning stuff out. I am trying to focus on where we have core strength and what we can build on. We have core strength around storage management, so we're going to build on that. But we'll build on it in a context of the secure management of the enterprise.

CRN: How is the software industry evolving?

SWAINSON: If you go back 10 or 15 years in this business, what you would find is literally thousands of companies who had point products that played all the way from application development to infrastructure and to systems management. So there has been a clear trend toward consolidation, aggregation and the abstraction of a lot of those things. Standards have played a big role in this, along with the customer buying behavior. Customers have moved from being self-integrators to wanting to have someone else put a lot of the pieces together for them. I think the world will eventually end up having two, or perhaps three, classes of software companies. One will be the platform providers, such as Microsoft and SAP, and then there will be the people who provide cross-platform infrastructure. I think we are poised to be the leaders of that. The third category is the application guys. I don't think many of them can afford to make the transition that SAP is making and they will turn into more discrete providers of business logic and business processes.

CRN: How does that affect the way we need to think about systems management?

SWAINSON: In the old days, you knew exactly which application touched which database and the system management task was easier because the relationships were fixed. In this new world, the systems management task is actually more complex because any database could be a provider of information to any application in the environment. And yet you still need to know what the performance of that application is and what security protocols or permissions have been given to it. The importance of things that CA does gets magnified in this kind of world. That's why we did the acquisition of Netegrity. We think the requirement for a trusted provider of those types of services across the different platforms is going to be absolutely key. There's no doubt in my mind that Microsoft will do a good job of trying to manage their platform and that IBM will do the same and Oracle will do the same. But the real world is made up of combinations of those things, and who's going to tie that all together?

CRN: Given that set of priorities and your background at IBM, what is CA's main advantage over IBM?

SWAINSON: I think we're in a position to have much better relationships with the different platform providers than IBM is ever going to have. We can have a much better relationship with Microsoft than IBM has and a much better relationship with Hewlett-Packard and Sun [Microsystems]. This is something that I think IBM is challenged by.

CRN: Will CA continue to acquire companies to fill out its portfolio in this space?

SWAINSON: You will see us continuing to acquire. I'm going through the process right now of working with the development teams to figure out where the opportunities are and what our strategy is. But I can tell you, unequivocally, that we're going to do more acquisitions. When we think about these acquisitions, we look at them on multiple dimensions. We look at the synergy with our current product line and customer base and what they bring us in terms of channel capability. We're not doing acquisitions the way CA did them in the past. That said, we're also going to do more software development. We have a 5,500-person software development team. Frankly, we don't talk enough about how much we have done and are able to do.

CRN: How will you bring all of CA's offerings together in a cohesive manner?

SWAINSON: You have to correlate all these things. You have to have a story for the marketplace about how this fits together. We have 500 products. You can't go to market with 500 messages. You have to go to market with one message or maybe two messages. Let's face it. Five years ago, this was an acquisition vehicle for contracts. We've changed a great deal since then. We've become much more of a bona fide software company. But we need to continue that transition. And one of the things a software company does is that it has brands, it has value and it delivers that value to its customers. A big part of what I'm focused on in my first couple weeks is how do I build the brands? Unicenter is a strong brand. It's synonymous with systems management. It could be stronger. ETrust is a good brand. It's not synonymous with security yet, but it could be. So how do we make that happen? Just as I did with WebSphere at IBM, I'm going to try at CA to create a very strong set of product brands and link them together so we have something that our sales team can go out and sell in the marketplace. By the way, we have the corporate brand that has some rust on the edges and we've got to do some work around that. Not all the attributes in the CA brand are viewed positively in the marketplace.

CRN: What role will the channel play?

SWAINSON: We've only started to really explore the use of the channel to reach markets. Gary [Quinn] and his team have done a great job, but we're just getting started. There's huge potential there. Heaven knows how good this could be if we do some things well and execute well around our products, customers and in the channel. One key thing is that we design our channel programs so we don't have a services team that's going to take away service revenue from our partners. The opportunity stems from the fact that this is a market that is going to grow faster than we can possibly get at it and become more important. There's a huge opportunity for the channel. We need channel partners. We can't reach the midmarket without channel partners. There are certain niches even in the enterprise we can't reach without channel partners.

QUINN: We don't normally have a services organization. We have one, but we need that for some customers that want us to deliver services for particular products. But in most cases, we don't have anything beyond implementation. We're not building up a business like IBM Global Services. Our major thrust right now is finding full-service partners that can support a mixed environment that uses our management solutions.

CRN: Will CA roll out a Unicenter product for the midmarket?

SWAINSON: Gary's team has actually done some work to understand what that means. We're looking at the right packaging, pricing and product for the channel. To the credit of the development teams, they've been in the process of systematically looking at making it more componentized. That gives us an opportunity to now think about Gary's requirements as opposed to doing what everyone else has to do, which is take out razors and kind of cut away the edges.

QUINN: We're not taking the Unicenter product, stripping down some feature functionality and trying to figure out how to jam it into the midmarket. We're building a solution to address that market. It's a little broader than Unicenter, but we're working on that. The key is getting the product right. The packaging, pricing and the distribution model has to be correct for how those customers ultimately wish to purchase.

CRN: Where will the channel engage with CA?

SWAINSON: We're going to go to market outside the enterprise space through channel partners. Right now, we're starting to expand our list. Gary's done a great job of building this program from nothing a year ago to something today. But it's still embryonic. It's embryonic, in part, because we're being very careful about picking people who have the right profile. But we shouldn't be under any illusions about how long that will take. One of the reasons we don't have as many people as we would like in this program right now is that there haven't been that many people to date who have been focused on this secure enterprise management area.

CRN: Are you going to do anything to make it easier to engage with CA?

SWAINSON: Our sales force used to be focused on the named accounts. Now we are shifting that focus to managing a territory. One of the subtleties in that shift is that you then have to pay attention to all the people that play in that territory, including your channel partners. IBM is making that transition. But it's not an easy transition to make. We are at the early stages of doing it. We are telling our sales team that they are not simply responsible for the thousand named accounts, but they also have their territory responsibility.

But for this to work, you have to set up the infrastructure and management systems. Frankly, you have to set up the compensation system so that people will do what you want. We will be substantially executing this model in North America next year. You can't simply stand up at PartnerWorld and declare that partners are your best friend if you don't then address the fundamental motivators in the management system that leads people to do what they think is the right thing. People are essentially rational. They will do what they perceive to be in their best interest. If you align their measurement system and pay system in a certain way, and if that alignment causes them to continue to want to take the deal direct, they'll take it direct. The other side of this is you can design it in such a way that your rational, profit-seeking sales team sends everything through partners. And then your margins go to hell on a handcart.

You have to do this very thoughtfully. It starts with territory design and then goes on to management motivation compensation systems. I'm not naive about this. There always is a channel conflict around the margins and we'll work through that with our partners in an open and honest way. As long as you have a parallel structure for your channel partners, these things inherently are in conflict. By putting it into the field organization and telling the area and regional managers you're responsible for all the revenue in your territory, and by giving them sub-measurements to keep them focused, you will get the right behavior.

QUINN: The direction we were moving in North America was the same model that we had in Europe, which was we moved all the components of the business under a territory manager. The territory manager is responsible for growing that entire business The guy who runs the territory is responsible for giving customers choice as to whether they would like to do something directly with us, and he's responsible for all the channel business that goes on. And he's measured a different way. He's not measured on, 'Did I get a sale today?' He's measured on, 'Am I growing a business on an annual basis?'

CRN: So as you look into future, what percentage of CA's revenue do you think will come through the channel in 2006?

SWAINSON: We're just in the process of figuring out what the fiscal 2006 picture is going to look like. But I think 30 percent through the channel is a realistic design point for us.