CA’s Big e-Change
Mergers helped CA move briskly from mainframe utilities to the network management niche. Now it has jumped forward, as an ebiz platform and services provider, with Jasmine ii and more strategic partnerships, including an ASP deal with
Satyam.
"It’s a
crazy world out there," says CA chief Charles Wang. "Cyberterrorists,
viruses, a trillion-dollar NASDAQ yo-yo, and software that can
think..."
In this crazy
world, CA’s little ‘thinking software’ agents have symbolized the
direction in which the company has moved: from network management to enterprise
management to ebiz infrastructure provider.
Over a year ago, CA introduced
neugents–intelligent ‘neural network agents’–as pieces of software code
distributed throughout a network. They would collect data from network
equipment, warning users and IS managers of network issues, and predicting
network problems including impending outages. These were part of Unicenter TNG,
the network management tool that had evolved into a family of enterprise
management software products.
Along with the evolution of
Unicenter TNG, and of CA itself as a ebusiness management platform and service
provider, the neugents have evolved, too. They are now ‘intelligent business
agents.’ A neugent can now analyze volumes of historical credit card
transaction data, study fraudulent transactions, and then apply itself to fresh
transactions as they occur–to predict on the fly whether a particular
transaction is likely to be fraudulent.
The latest neugents are part of
Jasmine ii, an object-oriented ebiz database platform. Jasmine ii
lets businesses link to customers, suppliers and associates. Just as the earlier
neugents studied network traffic, their ebiz descendants also work by studying
lots of historical data and identifying trends. They learn the normal behavior
of transactions or customer buying patterns, and apply the knowledge to predict
future behavior.
For instance, a credit card
company like Amex spends staggering sums bombarding its card—holders with
millions of mailers. Amex can use neugents to predict which 15,000 customers
will actually buy a particular product or service, instead of simply sending out
a million expensive mailers. A clothing company in London used neugents on its
1998 data to predict which 10,000 customers would be their best ones in 1999.
The results turned out to be 55% accurate, according to CA sources. Where
normally the company would have mailed its offerings to a third of a million
prospects and got 2% response, mailing to just 10,000 people and getting 55%
response helped it save a fortune. Neugents will become better at predicting as
they get additional data to chew on, says CA.
E is for paradigm shift
With $5.6 billion in 1999 sales,
CA is the world’s third-biggest software company, trailing behind only
Microsoft and IBM. Unlike the top two, none of its revenues come from consumer
software packages, but from Unicenter and a vast array of software for managing
large computer works–the "plumbing behind the scenes,’’ as CEO
Charles B Wang puts it.
CA has grown rapidly over recent
years, while remaining the most profitable company after Microsoft, and moving
out of mainframe software into client-server and Internet systems. It gets
nearly a third of its revenues from its ebiz infrastructure products and
activities. From the beginning, CA’s fortunes have been driven hard by Wang in
a direction defined by his immigrant background–scarce funds, hard work,
little hype, and street-smart toughness.
CA was largely a mainframe
utilities company till it started work on Unicenter. Then, with the 1995
acquisition of Legent, it had the technology to create Unicenter TNG–‘the
next generation.’ TNG lets enterprises manage everything on a network, from
monitoring large systems to tracking and updating software loaded on desktops
scattered across the network, in any city. 3-D visualization lets IS managers
"get into" buildings and right into the target computers or network
equipment. TNG has stood up very well to competition from Tivoli, from IBM.
An immigrant from Shanghai to New
York City at the age of eight, Wang took over CA in 1976. CA was originally a
small Swiss software company that, in 1974, signed up Wang as its North American
distributor. Wang sold so much of its software that, by 1980, joined by his
brother and lawyer Tony Wang, he bought out the Swiss and took the company
public. While Wang owned half the CA stock, his brother held a fifth of it.
There was no venture funding, and Wang bartered computer services for office
space in Manhattan. When they ran out of money, "We went and got a new
credit card," he says. Over the next two decades, Wang went through some
200 mergers and acquisitions, the most recent being the $4 billion purchase of
Sterling Software. Wang married, divorced, and then remarried–his second wife
being Nancy Li, CA’s Chief Technology Officer. Typically, Wang kept the
marriage quiet for several years, with the couple even travelling to work in
separate cars.
Wang has built up a tough, almost
ruthless image–in those acquired companies, he rapidly fired top executives
and hundreds of programmers. He’s even sued customers, including CA’s
largest one, EDS, in 1992, for licensing violations. However, this ‘software
Rambo’ image is something he, by all accounts, is keen to shake off.
Among the big PR boo-boos was a
decision to grant $1.1 billion in stock to Wang, Sanjay Kumar, President and
COO, and Russell Artzt, EVP of share R&D. Wang’s $670 million share
rocketed him to the position of the highest-paid CEO in history, and Kumar too
went up to become the highest-paid non-CEO executive. This was part of a plan to
bind the executives to CA for 12 years. But instead of dishing out all 20
million shares on one day (with a $675 after-tax impact for CA), spreading the
impact over some years would have been a lot better for the sentiment of CA’s
other shareholders. As it happened, nearly a dozen shareholder lawsuits branded
Wang as the definitive greedy CEO.
Kumar and Wang have both been
relatively frequent visitors to India, and CA has a development center in
Calcutta–a joint venture called CATS, with The Chatterjee Group Software. Some
of the development work on Jasmine ii and other products demonstrated at
the recently concluded CA World was carried out at the Calcutta center,
according to CA India Chief Venkat Subbarao. In India, CA has major Unicenter
users ranging from industrial plants to ISPs.
On a quick visit to Bombay on May
17, Wang and Satyam Computer chairman Ramalinga Raju announced an application
service provider (ASP) venture between the two companies.
This follows CA’s $3 million
ASP venture with Acer in Taiwan last December, tie-ups with over 20 US-based
companies in May, and recent deals in Thailand and elsewhere in Asia.
The JV will let SMEs rent CA’s
InterBiz apps through Satyam’s network, providing solutions for supply chain,
financial and manufacturing apps. SMEs can cut down hardware and software
licence costs, and pay based on actual usage.
ASPs, ebiz platforms, mobile
computing, managing palms and police cars, object-oriented databases for Web
content and 3-D rich media...this is a long way ahead of the boring old ‘plumber’
CA. Wang and Kumar are busy driving the company from a street-smart financial
scavenger to the Net-age technology innovator. It’s been an uphill task, but,
with the explosive demand for intelligent plumbing across the planet, the
picture for CA looks very good indeed. Many saw Cisco catching up with Microsoft’s
market cap as a symbol of the desktop era handing over the reigns to the network
age. When CA World returns in Orlando, Florida, next year, it too probably will
have grown considerably stronger in the market cap, and closer comparisons with
Microsoft will be inevitable.
Even before reaching its present
hot ebiz company status, CA’s performance has remained consistent. Add the
letter e to this performance, and CA could be an exciting stock to watch. CA’s
January-March quarter results were in line with expectations–the revenue grew
by 31% to $2.13 billion, and net profits stood at $551 million, or $1.13 per
share, compared with $458 million a year ago. The Unicenter family sales grew
34% to cross the $1 billion mark, and services revenue rose 24% to $115 million.
Some $945 million came from mainframe products. In January, it had announced
profits at 13% up, for its October-December quarter, with net income at $401
million, up from $355 million a year earlier.
Today, CA has stepped up its PR
and media-savvyness dramatically. If it once shared with Cisco a place in the
giant-but-unknown IT companies’ hall of fame, it has, along with the later,
stepped out of the shadows into the light. It’s no coincidence that both are
in the business of network infrastructure–which today goes much beyond merely
keeping networks running. It’s the backbone of the Internet age, and a very
enviable segment to be in.
A Dataquest
report from New Orleans, Louisiana, USA, and New Delhi.