Q&A: BMC's CEO talks up products, profits

'We're winning the bake-offs against competitors,' says Robert Beauchamp

BMC Software Inc. last week announced strong second-quarter results, including a 7% year-over-year increase in revenue to $387 million. BMC's CEO, Robert Beauchamp, predicted in an interview that the Houston-based company would see higher revenue for the rest of the fiscal year. BMC, which makes systems management software, is pressing ahead with its Business Service Management products, said Beauchamp, who has been with the company since 1988 and its CEO since 2001. He spoke with Computerworld about the company's success, and its plans to continue that success.

Excerpts from that interview follow:

Robert Beauchamp is president and CEO of BMC Software, Inc.
Robert Beauchamp is president and CEO of BMC Software, Inc.

Given your company's recent financial success, why do you think IT pros like your products? It started four years ago when we conceived Business Service Management products. We knew that the Information Technology Infrastructure Library [ITIL] and IT process optimization was going to become a central focus of IT. So we built an entire product portfolio and a whole strategy around software to manage IT processes and ITIL optimization. We saw in the last quarter that Chevron has a strong initiative around ITIL implementations trying to consolidate their service desks around the world. It resulted in a seven-figure transaction for us. We won [that work] over HP and CA. In the last year, CIOs now talk more about IT process improvement than about infrastructure. We saw a 30 % growth in our BSM product line this quarter.

So, why are you better than HP, CA or IBM? The honest answer is that we have, by far, the best products and, by far, the largest share of sales of IT service management software. We're winning the bake-offs against competitors on software technology and expertise. We were out the gate first in April 2003 when we announced BSM, and nobody else was even talking about it.

Is the revenue pie for these products suddenly bigger, or are you getting a larger piece of the pie? It's both. We're seeing IT organizations say, "Let's go update service management environments with new Web-based technologies and let's use ITIL." Nobody was even talking about ITIL outside of Europe four years ago.

But could your increased revenues also be a result of the fact that IT shops have loosened the purse strings after the long recession? Oh, the recession, I don't even want to think about those days. Now we're seeing people turning their focus back on IT. BMC was listed in a recent survey among those vendors who would gain from IT spending, with Microsoft and others.

Is there also a change in philosophy among CIOs who weathered the recession and now want to make a strategic shift in how they spend money? Well, I think that there is still pressure to reduce costs in IT. A large government agency that is a customer told me last week that it views spending on IT as non-mission-critical, but they see with service center and IT standardization software they can pull $25 million out of IT and give it back to use for mission-critical needs.

If you can generalize, what do your customers most want from BMC? And from the management software industry? I'll answer by telling what the CIO of UBS in 2002 said to me, which was maybe even the very day that we bet the future on BSM. He said, "We have two server vendors, two database vendors, two ERP vendors and 52 management tools vendors, and none of you can tell me how my business is performing." He added that the first company that delivers "an integrated way of managing my IT infrastructure and my IT processes to my business services will make a lot of money." So we began to build that. That's one reason we acquired Remedy. He told me to please simplify the IT management layer, map the IT processes to my businesses services, simplify the thing for me. Forrester Research recently said a company that implements BSM stands to save 25% on their total IT budget.

Does implementing IT service management bring with it the possibility of an automation backlash from laid off workers? Every company in the world has to ask humans to add value for competitive differentiation. If a company uses BSM, they can free up employees for work that's core to the company. I was at a site the other day where 70 IT staffers were trying to find what was broken with a system. IT shops are the cobbler's children. They are the least automated department in any company today.

How important is the interoperability of BMC products with those of other vendors? Do we interoperate? Yes, and we always have. Our software should be a heterogeneous abstraction layer. The Configuration Management Database is the single hottest topic in IT right now, and BMC has joined a consortium of all the major players to set certain standards around the CMDB. That's so we're not creating separate towers of Babel. BMC, by the way, is the only company with real market share in CMDB so far.

Where do you stand on mainframe management tools? It's a third of our business. We're winning business because of that, with 20 new companies just announced. In October, we announced new mainframe discovery tools.

Are you spending one-third of your R&D on mainframe tools? We don't disclose those percentages, but the R&D for mainframe tools is a lower percentage because those products are more stable and we spend most of the R&D money on new technologies.

Speaking of new technologies, what is BMC's strategy for capitalizing on the exploding market in mobile devices and services? The CIO used to have the challenge to manage hundreds of devices, and now it might be hundreds of thousands. The question is whether you want to manage each type of device in a separate silo or come back to a central location. We are already doing that, tracking mobile devices and desktops with the Remedy [IT service management] suite of products.

Specifically, are you working on a tool that would count cell phone minutes to help control those costs? We have worked with specific customers asking us to do just that, actually. And we've worked with some mobile phone providers.

The market is giving attention to on-demand applications and software as a service, so how are BMC's own efforts in this area going and do you have expansion plans? We're definitely in the space. We have a whole set of business partners to build business based on on-demand management, and we provide on-demand offerings directly from a work group here.

On a personal note, you've been at BMC since 1988, which is unusual in today's business and IT climate. It seems to have paid off for you, right? I think the statistics bear me out that CEOs that are homegrown outperform those that are brought in from the outside. I think the reason for that is that I just don't have to spend a lot of time being educated on things that I know already. It means I can work on value drivers. And I don't have to sit in meetings where you spend the first half of it educating me. I already know the business. I've run marketing, R&D and mergers and acquisitions. I've spent much of my career in sales. I know this company inside and out. So we can spend time as a management team focused on growing and changing and focused on customers.

We've talked a lot about what BMC is best at, but what does BMC most need to improve upon? We're already focused on simplifying our business, everything from the customer experience with contracts and quotes to support, even though we are still rated at the top on support. We could do better getting the message about BMC out. We have 15,000 customers and have such a powerful message now. When we get in front of the CIO, we win business, but [we] need more face time with CIOs. I'm proud of what's happening here. We've just experienced our sixth consecutive quarter meeting or passing our financial guidance to analysts.

Copyright © 2006 IDG Communications, Inc.

  
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