Interview with SANJAY KUMAR: "Our Next Big Thing Is Subscribed Software"

INTERVIEW WITH SANJAY KUMAR
"Our Next Big Thing Is Subscribed Software"

He and his mentor, Charles Wang, may be facing their worst crisis ever, but Sanjay Kumar, President and CEO of the fourth-largest software company, Computer Associates, isn't letting that distract him from the business at hand. At the CAWorld 2001 in Orlando, Florida, BT's Ashutosh Sinha caught up with Kumar to talk about the challenges facing CA today. Excerpts:

Sam Wyly, who sold Sterling Software to your company last year, wants to oust you and founder-Chairman Charles Wang because, allegedly, the top team at CA has grossly overpaid itself at the cost of other investors. How confident are you of winning this battle?

I would never be so arrogant to say that we have it locked up. I believe we will win. People have to rely on our record. (Wyly) has attempted to rewrite the records and call it history. He has been saying things that are just not right. I think we understand this business and I love the technology business. I am not in it to raid a company and break it into four pieces...

But in the past you did try to take over Computer Sciences Corporation...

Yes, but then when they said no, we went away. We didn't go for a hostile deal. I sat down and negotiated with Mr. Wyly for buying Sterling Software. That was a friendly deal. He wrote a glowing letter (after that). I believe that his motivation is absolutely opportunistic. I think shareholders will rely on the records. Our customers know how sincere we are. We have the fortunate circumstance of having the support of Mr. Walter Haefner, who is our largest shareholder. He is a 20 per cent shareholder in the company. Management and employees own another 10 per cent. So that makes it 30 per cent. It is not about getting 51 per cent to win, but it is about getting a much more substantial percentage than that. I won't be arrogant to say that I don't worry about it. I do worry about it.

As an infrastructure supplier for enterprises, it is tough for CA to tell people what it does. How best do you describe your business, given that it is witnessing a lot of changes in these turbulent times.

It is often very difficult to describe our business. It is like telling people that we do the plumbing and they say 'we don't see the plumbing'. When you turn your PC on, it does not say Computer Associates, it says Microsoft. And when you use a mobile phone, it does not say 'software by CA'. We have had strong development and sales, but we have never been a big marketing company. Oracle has been a big marketing company and people know the name. Microsoft has been a terrific marketing company, and we can learn a lot from them. So, we are trying very, very hard to move our message out into the marketplace that business people and customers can understand.

How has the Internet impacted your strategies?

Thanks to the Internet, the importance of infrastructure is reaching the business person all by itself. So, we no longer have the big problem of going to traditional infrastructure people and explaining to them that we are in the infrastructure business and here is what it means. They are now starting to understand the value of this. We are also getting more and more involved in projects outside the traditional data centres. The data centre was viewed as something that was a necessary evil. We are much more visible on that front today.

Since you are making packaged software smaller does that mean in addition to the large corporates, there is an increased focus on small businesses?

Absolutely. I explain it like this. The world is like a big pyramid. The Fortune 10,000 will always be 10,000. They might consolidate by buying a few here and there. But there is no expansion. The real strength is below. Entrepreneurs are setting up shops everywhere. You have to focus on the traditional business, since that has got to become more efficient. A small company employing 500 people is an important business for CA because there are thousands of them around the world.

That would make India and China very important markets for CA.

Exactly. Very important. People miss the point about these two markets. They will never be as big as the US. Never. But that is not what we are focusing on. It is the growth. The growth in the US is nominal, European growth is nominal. The growth in China and India is going to be staggering. The aggregate will never be as big, but growth, which is what the technology companies want, will be explosive. Because businesses in developing markets need to compete and they have to be more efficient. And I believe that most of those markets understand from a public policy perspective and the good private enterprise perspective that technology can be the great leveller.

But most of the businesses in these markets are small, and can't afford the big investments that technology requires. What is CA doing about it?

Yes, a focus on markets like China and India and also the small enterprises would mean a different way of financing the purchases by these companies. They may be very wary of committing upfront for something that is new for them. That is the big business model change that we have announced. We used to sell to customers technology for many many years at a time. That was serious investments on their part. Because of our focus on developing markets and because of our focus on getting customers to move into our technology, we want to be flexible to match the company's business, we want to grow with them.

So, now, in markets like India and China we are going to customers and saying, 'Listen, buy for one year'. If your business grows, then keep on buying. Even one month at a time, it does not matter. Because you can get the efficiency of the software to help you with the returns on your business and grow as the business grows. The big thing we will do in Asia, by the way, is what we call subscription pricing...subscribe to software as a service. It is like a magazine subscription. We have started it in India, China, Taiwan, Hong Kong and Korea.

ASP has been a focus for CA worldwide. Is the business, including your joint venture with Satyam in India, performing to your satisfaction?

Globally, the ASP business is slow. Our joint venture with Satyam is focused on supplying the infrastructure for the business. In general because of the big telecommunications slowdown, the dip that the market took has not helped. My expectation is that 2002 should be a much better year for service providers. This is a tough year... very tough.

CA has evolved a 3x6 theory for refocussing its business. How does it work?

The three in this formula is really the strategic areas: information management, process management, and infrastructure management. But the real focus is the six areas, the verticals that give priority to the CA business. Security-this is very important since it is an important part of the e-business infrastructure. Storage-the fastest growing commodity in the hardware infrastructure. Enterprise management-it is about managing the enterprise infrastructure since if you don't manage the infrastructure the customers can't come to you.

Transformation tool-which is probably the most nebulous kind of area for the average person. This is really technology to build other programmes with. The fifth area is portal-it is the eyes of the future. It will run on mobile and other devices in the future. The sixth is really the technology area that's not a product. That is focused on visualisation. If technology has to be used by masses in the future, we have to be more visual than ever before.

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