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Summary: Here's why tracking newly private tech companies matters: Chances are good that at least one of your go-to enterprise vendors will be going private at some point.
BMC Software's recent move to go private highlights an enterprise technology trend that will impact buyers in some way. The biggest question revolves around whether customers benefit or excel when your large enterprise provider goes private.
Here's why tracking newly private tech companies matters: Chances are good that at least one of your go-to enterprise vendors will be going private at some point. Some of these vendors will drop out of site and restructure heavily. This restructuring could ultimately affect the support the customer sees. Other companies will go private, retool and become more aggressive and innovative.
BMC Software plans to be in that latter category. According to Bob Beauchamp, CEO of BMC Software, the company is poised to better pursue growth markets as a private entity. Why? BMC will have multiyear and annual spending plans compared to its previous 90 day cycle that would pause at times to hit the financials Wall Street demanded.
What's unclear is how this will play out. The tech giant as private company history is mixed. Some companies go private, rebuild and go public again and do well. Seagate Technology is one example of a success story. Other companies such as Avaya and Novell have had more mixed results. Infor, an ERP competitor, has made some strong product strides, but some analysts question whether it has the balance sheet to compete with SAP and Oracle. BlackBerry is likely to go private and could be split up. Dell needs to diversify away from the PC business, but the effort will take years to play out.
We caught up to Beauchamp and BMC CTO Kia Behnia to talk shop and the master plan as a private company.
What are the perks of being private so far? Beauchamp said he expects that BMC will be able to be a lot more aggressive. "We now have the ability and flexibility to behave in a less predictable manner," he said. Much of this flexibility comes from being freed from a 90 day spending plan cycle. In a public company, projects are started, paused and restarted all based on how tight the quarter is relative to Wall Street expectations. "I had a CIO of a Fortune 500 company say 'I wish we were going private' because he had to manage his budget to the last day of the quarter and then wait for the CFO to release funds to spend again." By going private, BMC is able to spend on annual and multiyear investment plans instead of riding the quarter ups and downs.
Behnia added another argument for going private is that funds that would have been used for stock buybacks could be funneled into acquisitions and research and development. Overall, it remains to be seen how funds get used. After all, private companies do have to pay out dividends to owners.
Enterprise software is evolving under selection pressure from challenging economic conditions and the adaptive possibilities afforded by cloud computing, mobility, big data analytics and social engagement.
BMC will spend on cloud, acquisitions, big data and becoming "a standard in the management layer." Beauchamp said that the company plans to aggressively chase SaaS, big data and cloud computing. The general idea is to use BMC's role as the Switzerland of IT and business management software to connect systems with one management console. "We can now have an element of surprise and be first to market," said Behnia.
Do customers care? Beauchamp said he has a whole presentation on what it means for BMC to go private, but hasn't had to use it. In most cases, CIOs ask if anything is dramatically changing, Beauchamp says no and technology talk ensues. BMC has had to communicate more with its employee base. "There are enough stories about companies going private for restructuring that you need to communicate directly to employees that BMC is about a growth play," said Beauchamp. One customer, however, cared, but that's because it was a government agency wanting background on Bain, an owner of BMC. Bain became an election issue last presidential election.
The plan. BMC's core strategy is to provide an integrated environment to manage IT and digital services. Think of an ERP system to manage technology and business infrastructure. Most products in the BMC portfolio will be integrated, said Beauchamp.
Where are BMC's bets going? Beauchamp said that cloud, SaaS and mobility are multiyear investments. These businesses will take years to develop, but deliver long product cycles. Growth in these areas will come via acquisitions and organic growth. Behnia noted that BMC's efforts to launch enterprise app stores and manage bring your own device programs. Behnia argued that the workforce is going mobile and wants self service at the same time the IT department wants fewer support calls.
Partnerships. BMC has crafted a few high-profile partnerships with cloud providers. For instance, BMC has hooked up with Salesforce to jointly sell Remedyforce, an IT service management service. Amazon Web Services, another key BMC partner, points directly to the company to manage hybrid cloud environments. Beauchamp and Behnia said similar partnerships will be rolled out. The idea is that BMC wants multiple partnerships to manage everything from Azure clouds to VMware as on-premise and public cloud infrastructure integrate.
Behnia said BMC would be interested in OpenStack, but hasn't seen customers adopting it just yet. BMC usually waits until customers actually deploy to add management functionality. "OpenStack lacks capabilities for mission critical environments today, but development and enthusiasm is growing," said Behnia. Beauchamp added that BMC will remain agnostic and plug into any infrastructure. "We've abstracted management so we can plug and play. Customers don't want to be hardwired into an infrastructure stack," said Beauchamp.