Strategic moves steer CA towards dynamic future

PUBLISHED : Monday, 13 June, 2005, 12:00am
UPDATED : Monday, 13 June, 2005, 12:00am

John Swainson joined Computer Associates International as its president and chief executive last November, after a successful 26-year career at IBM, with an eye to clean things up at the beleaguered, scandal-hit software firm.

His recent corporate acquisitions of Concord Communications and Niku seem to point the company in the direction of new opportunities for growth, but it has not been easy. He remembered how flabbergasted he was to find out that a bigger broom was needed in his new job.

'The company had an annual turnover of almost US$4 billion with offices around the world but it was still using spreadsheets to run its business,' Mr Swainson said.

In a few weeks, New York-listed Computer Associates announced an extensive transformation of its operations. It enlisted the help of German software giant SAP and consultancy Accenture to implement a modern enterprise resource planning system. This global transformation focused on four areas: core financials, business intelligence, customer relationship management, and e-procurement and sourcing.

The move also marked a significant step towards fulfilling a milestone in the company's deferred prosecution agreement with the United States Department of Justice.

In the past three years, a financial accounting scandal over how it booked software sales rocked Computer Associates. That forced the company to restate earnings from 1999 and led to last June's dismissal of chief executive Sanjay Kumar, who has been charged with securities fraud.

To adapt to its circumstances, Computer Associates announced a restructuring plan to align the company's investments with its strategic growth opportunities. The plan included a workforce reduction of about 5 per cent, or 800 positions worldwide.

It then hired Mr Swainson to strengthen its core systems and security management, and consolidate its leadership position in enterprise management.

Before he joined, Mr Swainson served as vice-president of worldwide sales at IBM's Software Group, responsible for selling Big Blue's diverse line of software products through multiple distribution channels.

'I have observed CA as a competitor for many years and have been impressed by the depth of its management software portfolio and its position in the marketplace,' Mr Swainson said.

Last week, Mr Swainson completed the US$337 million acquisition of network management software supplier Concord and announced a US$350 million agreement to buy Niku, an information technology management and governance systems vendor.

These deals helped push Computer Associates past the US$1 billion mark in total acquisitions made over the past 12 months.

Research firm International Data Corp said: 'Besides proven technology, CA gains Concord's customer base of more than 2,700 enterprises and 600 service providers, which presents an attractive new revenue stream for CA.'

With Concord, Computer Associates should pick up an annual revenue base of about US$150 million worldwide and would also gain the opportunity to enter new markets in the service provider sector, cross-sell solutions and enhance account control, the researcher said.

By acquiring Niku, Computer Associates gains a critical new product that its customers are demanding. The system will be integrated with technologies from its US$1.5 billion Unicenter business.