How BMC’s CEO plans to cut your IT costs by a third

More than two years after going private, a revitalized BMC is focusing squarely on enabling your company’s digital transformation.

In 2013, venerable IT management vendor BMC Software went private, a move that CEO Bob Beauchamp says enabled the company to invest heavily in modernizing technology, fresh leadership and a new strategy aimed at helping customers advance their digital transformation initiatives. In this installment of the IDG CEO Interview Series, Beauchamp talked with Chief Content Officer John Gallant about how BMC’s Digital Enterprise Management plan can deliver ‘massive cost savings,’ make it easier for companies to get to the cloud and manage services that span the data center and cloud. He discussed the cloud-focused transformation of the BMC product line and how the company is helping customers capture opportunities around the Internet of Things as well.

Bob, we last spoke when BMC went private in September, 2013. Will you remind us why you did that? Also, what did that allow you to do that you couldn’t do as a publicly held company?

Those are two very different questions. Let me take the second question first. Since going private, the company has been able to invest an enormous amount of money in innovation and developing new technologies, new go-to-market capabilities and bringing on some world-class executives. In order to do that, we decreased our profit goals because our investors felt that with this new digital wave coming, those companies that have the right products, technology, go-to-market offerings and executives would be in a great position. They let me invest a lot of money in those areas.

As a public company you could do it, but the company back then was already under quite a bit of pressure from the public market that wanted profits to just go up forever. The private investors let me go the other way. They let me lower the profits, to spend literally hundreds of millions of dollars on new technology and new people.

I’m going to ask a number of questions about your new Digital Enterprise Management strategy but before we get into that, I want to dig in a bit more about what’s changed in the past two-plus years at BMC.

At the highest level our financial goals are different. We set out to invest so that we could accelerate the top line. Our goal has really been about top-line growth in the newest areas, the fastest growing areas of the IT market and less about generating profit every year. We’re still very profitable, by the way, but it was less about that. It’s all been about top line growth. In order to do that, we brought in a whole new set of executives. I brought in a new head of worldwide sales from Salesforce. I brought in a new chief human resources officer who had also been at Salesforce. We brought in executives who had worked at VMware, Mercury [Interactive,] PTC. We’ve been able to bring in executives from some of the fastest growing companies out there. In our business units we have two general managers who were here at the time but the other three are all new executives that were brought to the company around that time, so a whole new executive slate all focused on growth.

Then the business model is different. Before we went private we were functional. We had one head of development, one head of sales. In order to be successful at innovation and growth, we set up five different business units with presidents across each. Their job was to be innovation centers to drive best-in-class products and the most competitive products in each of those areas. That’s succeeded. Every single one of those product lines has improved the top line markedly since then.

We also set up an overarching strategy that we believed would carry us into the next decade which, as you brought up, we coined Digital Enterprise Management. That strategy [centers on] managing the digital enterprise, that BMC was going to be the company that would manage all of that complexity so that customers could make this digital transformation. At a financial level, as I’ve said before, the company has been delivering significantly better top-line growth. We had year-to-date total company new bookings growth [in the] strong double digits.

Remedy, which had been in decline back when I last talked to you, had new bookings up double digits in the quarter -- strong double digits year to date through three quarters. Now that we’ve got the top line moving, our profit is also now improving. We’ve had several quarters of steady, improving EBITDA over the course of the last year. Financially we’re in better shape, technology we’re in better shape, management we brought in a whole team of high-growth innovators and we’ve launched a new strategy for the entire company.

I wanted to ask about one role in particular. It’s my understanding that you hired a chief customer officer. What’s been the result of that?

Yes, we created a position of chief customer officer and hired David Gai, who had been at BEA. He is focused on tracking the complete customer experience and customer satisfaction and customer value realization. We’ve had significant improvement in customer renewal rates across virtually every product line, which is very important to us. Customers are betting with their wallets that the products they bought from BMC previously are going to take them into the future. We’ve seen much higher customer loyalty through improved renewal rates across the entire portfolio. We’ve seen our customer satisfaction scores continuously improve, our NPS {Net Promoter Score} improve. We’ve seen the number of open customer trouble tickets go down and the time to remediate go down markedly. We’ve set up campaigns to drive down the amount of time it takes from when a customer calls in until we get their problems resolved.

This executive doesn’t get into whether the problem is sales’ fault, is it support’s fault, is it the product’s fault? He calls all of us together, the entire executive team, and says: ‘This is what that customer is experiencing. We need to make significant changes in order that no other customer has to suffer through what this customer did.’ The other executives trust that this person, who doesn’t have a dog in the fight, is articulating a clear view of what we could do better with all of our customers. That helps all of us.

One more question before we dive into the Digital Enterprise strategy. Let’s say you’re in that classic elevator pitch situation and you’ve got just a few moments with an existing customer or a prospective customer. What do you tell them about the new BMC?

That there really are no other companies out there today that can help an enterprise manage the complete breadth of their portfolio - from their data center through their cloud offerings to their Software-as-a-Service offerings to their mobile devices through their digital workforce to their Internet of Things environment. There’s no other company out there that can give them a management platform to manage all of it consistently so that the management layer becomes an accelerator, that it improves agility instead of becoming yet another widget to manage. We’re the only company out there that is truly focused on delivering a platform to manage the digital enterprise.

Let’s get into that now. These questions are designed to go top-down from the strategy to the implementation of it. Provide a high-level overview of Digital Enterprise Management, which I believe you have described as the operating system of the company.

Digital Enterprise Management is our vision for the management of all the digital services that the company provides, the infrastructure underneath those services, the processes underneath those services and enforcing the policies that are in place so that you can provide digital services to your customer. Essentially, we allow you to request, provision, automate, tune and optimize services in a digital world. We provide a complete suite of products that integrate to give you the platform to manage all of the capabilities of the digital enterprise.

Specifically, you have brought to the table in new products that are moving that strategy forward. We’ll also talk about how existing products have evolved but what’s new that’s advancing this Digital Enterprise Management strategy?

I’ll talk about one of the core platforms. Remedy 9 has come out. Remedy originally was a trouble ticketing system that allowed you to enter a ticket and track it to resolution. We’ve transformed it into a complete service management platform. An employee, from their mobile device, can request a digital service, perhaps something as simple as a password reset, perhaps it’s something more complicated like they need access to one of the core applications, like SAP, for their entire team. They can use BMC’s MyIT solution to make the request and then Remedy 9 can process the workflow associated with it and pass that to our workload automation product that can execute all of the necessary steps in the right order to provision those systems.

We can actually provision the servers from bare metal all the way up. It’s providing self-service to the enterprise for employees and customers and we’ve done that with MyIT, we’ve done that with Remedy 9, we’ve done that with BMC’s TrueSight Intelligence, BMC TrueSight Pulse. We came out with, I think, 70 new product announcements last year and it will be well north of that this year.

You’ve got a lot of customers who have been using your products for a long time. Can you help them understand how you’re going to move them forward there, how you’re moving the exiting products forward?

In general, it is important that we, as a company, not talk as much about products anyway. What we’re really doing is helping customers to implement their vision, their strategy and it’s our job to listen to their requirements and then bring technologies to bear that can solve that problem, that can help them deliver that innovation that they want to deliver. For instance, in the case of Vodafone, their global CIO wants every employee to have the ability to request any digital service from their mobile device and so we bring MyIT to bear for that. When that request comes they want Remedy Workflow Management, the service management product, to manage all the workflow associated with that request and then they use the automation products from BMC to automate, provision and build the systems necessary to deliver that request and do it very, very quickly with great reliability.

We ask our customers to tell us: ‘What is your vision of innovation? What are you trying to accomplish?’ We’ll implement a system that allows you to deliver your digital services using these technologies. Customers are less interested in hearing about individual point products than they are about solving big, complex problems using technology. We bring a set of technologies that’s the best in class to solve those problems.

But the reality is that you have customers who have existing investments in BMC technology. What kinds of upgrades are they looking at? What’s the roadmap for a customer?

Let’s talk about the Remedy install base. A few years ago BMC had an on-prem solution with Remedy version 7.x and, frankly, the upgrades were somewhat complex. The customer had to have people on staff whose job it was to maintain, build and provision that system. Today we offer Remedy 9 as a service, a SaaS offering, and that complexity is gone from the product. The product has been rewritten in Java. We have zero-downtime updates. When customers are using BMC products today, they should be the easiest to use, easiest to update, fastest time to value of any product in the portfolio and we bring our install base along with that just by the fact they pay maintenance.

They don’t have to buy the new product to get this, they get that new capability. If they want our mobile client then yes, we have MyIT that we’ll offer to them. We have millions of customers now, millions of end users around the world that have bought that new technology. But the core platforms that they’ve bought, we’ve modernized all those and brought them up to the digital era and the customers get that just by staying on maintenance.

Bob, can you speak more about how cloud is transforming the product line?

Two different ways. The first is we assume all of our customers are going to be using both public and private clouds to augment their existing on-prem systems. All of our products are designed to manage services. Heterogeneity used to mean different operating systems and different databases. Today, heterogeneity - which is what we really manage, heterogeneous environments - assumes the customer has components of their application on {Amazon} AWS or Azure or the Oracle or SAP cloud, as well as in their data center. We manage those and the data center seamlessly.

The other thing we do is offer our own products as a cloud offering, as a service. TrueSight Pulse is SaaS-based monitoring for web-scale applications and infrastructure. You can have it up and running in minutes and you can deploy it against your legacy systems inside your own data center or you can deploy it against AWS or Azure applications and manage inside those environments in a matter of minutes. We’re writing our software to give customers a single product portfolio that can manage into private clouds, public clouds and legacy systems seamlessly.

What percentage of your revenue today comes from cloud-based offerings versus traditional packaged and licensed software?

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