CA’s Big e-Change

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.

_{Software Rambo}

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.

_{From CA to e-CA}

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.