BMC aims to make cloud more manageable

Since being taken private six months ago, BMC Software has devised a new business plan based on systems management encompassing public and private clouds. Graeme Burton talks to CEO Bob Beauchamp about the strategy

When Bob Beauchamp took over from Max Watson as CEO of systems management software supplier BMC Software in 2002, the company was poised for a shift in its software sales from mainframe to client/server computing.

Twelve years later, and although Beauchamp can boast an unbroken record of revenue growth, the company has been overtaken by nimbler rivals that have grown faster and - especially - has failed to capitalise fully on the rise of cloud computing in recent years.

That, perhaps, is what helped make BMC something of a bargain for Bain and Golden Gate Capital, the private equity companies that teamed up to take BMC private in May this year.

Yet back in the 1990s, BMC Software was a top-10 software vendor. It grew in the 1980s as a provider of system management tools in the mainframe sector, before it diverted into client/server software from the mid-1990s and 2000s via a series of judicious acquisitions, particularly of Australia's Patrol Software in January 1994.

Today, mainframe software licence sales still account for as much as 40 per cent of BMC's revenues.

But consultant PwC's "Global 100 Software Leaders" report - from earlier this year - suggests that the company's cloud-related sales are minimal: just $10m in fiscal 2011. Even traditionally mainframe-focused rivals such as Compuware, CA Technologies and Fujitsu achieve higher cloud-related revenues, according to PwC.

For Beauchamp, though, BMC's acquisition by private equity is an opportunity to pursue a new strategy free from the pressure of being a public company. Bain and Golden Gate, he says, are "supporting the management through organic growth, investment in new opportunities, such as cloud and software-as-a-service, and running a better operating company".

The two private equity giants will also bring their financial and other resources to bear, if necessary, in terms of potential acquisitions, says Beauchamp. The first of these under their ownership was the July 2013 acquisition of Partnerpedia, an application management tool for licensing, provisioning, purchasing and selling cloud apps.

Indeed, the key to BMC's success under private management will be Beauchamp's cloud strategy. This means not just selling its software into Amazon Web Services or Microsoft Azure, but also providing software to enable organisations to monitor and manage their environments regardless of whether they are running applications in-house or in private or public clouds.

"We have the ability to manage a multi-supplier environment. Our assumption is that almost all our customers are going to use software-as-a-service products from different vendors, on-premise software, public clouds and private clouds. What we give them is a single company they can go to that can manage all of it," says Beauchamp.

He continues: "We recently announced a partnership with Amazon Web Services so that when a provisioning request is made, our engine can decide whether to go to Amazon or the private cloud."

In other words, in order for organisations to be able to move to the cloud, they need the technical management information so that they know what is going on throughout it. That information can not only help them to manage their environments when they extend into the cloud, but also help make provisioning decisions.

"We can manage that provisioning and do it all as part of one system. I was with the chief technology officer of a large consumer-goods company recently and he said that one of his big problems is that all of the stuff that they are trying on Amazon is effectively ‘phantom cloud'. They can't see it. That's unacceptable," says Beauchamp.

In addition, BMC's software promises to monitor service-level agreements and licences in order to ensure that organisations are purchasing no more seats or capacity than they require, and that their cloud providers are providing the service levels stipulated in their contracts, throughout their cloud, regardless of who is running their applications.

At the same time, though, mainframe remains a solid business, claims Beauchamp. But it won't be in mainframe computing that Beauchamp's role as CEO of BMC is made or broken, but in cloud computing.

One of the benefits of being taken private, says Beauchamp, is that the company can develop its long-term strategy free from the demands of quarterly reporting.

"I do not miss being [the CEO of] a public company: spending probably one-third of my time on the road talking to shareholders, reacting to earnings-per-share reports...

We can invest money in a quarter even if the revenue is not as good as expected. If you're a public company, you can't do that, you have to wait," says Beauchamp.
@GraemeBurton