John Swainson is approaching the one-year anniversary of his hiring as the top executive at Computer Associates International Inc. CA named Swainson president and CEO-elect last November, then formally gave him the CEO title in February. At CA"s software development facility here Tuesday, he spoke with a group of reporters and editors from International Data Group, Computerworld"s parent company. The main topic was the status of his efforts to revamp the software vendor, which was wracked by an accounting scandal, multiple government investigations, weak revenue growth and the ouster of CEO Sanjay Kumar before Swainson"s arrival.
Where do things stand at CA as your first year at the company comes to an end? I think it"s been an interesting year for the company. It"s certainly been an interesting year for me. When I was hired, the company was just coming off its heels from the government investigations. Whenever that occurs, you get an organization that"s a little unsure of itself. And the fact that a whole new management team then comes in leads to a little bit of uncertainty, too. We feel pretty good about where we are now. But it"s not an overnight transition, by any means. The timeline I now recognize is about a four-year timeline, and I really couldn"t have that degree of clarity when I started. There"s a good reason why you go into these things a little naive (laughs).
You mentioned that you"ve replaced half of CA"s senior executives with outsiders, streamlined the company"s product strategy, reorganized around new business units and made changes to the sales force. What still needs to be done? The first phase was to fix the problems. The second phase that we"re in now is to set the stage for stronger growth. Our [internal] IT environment was particularly weak, which was frankly a big surprise coming in here. I expected that CA, as an IT vendor, would have robust systems, and we didn"t and we still don"t. The mechanics of installing our new SAP system and a lot of [the other internal changes] will be done in the next 12 to 18 months. The changing of CA"s culture, which to some extent is first about customer relationships -- those are the long-term things.
Was CA worse off than you thought it was before you arrived? I don"t think the company was in worse shape than I anticipated. I just wasn"t sure what to anticipate. I was a little surprised by the IT systems. I knew CA had problems with customer relationships -- what I didn"t anticipate was [the state of] the IT systems.
You announced the SAP project last December. Where does it stand now? We are going to do a wholesale [system] replacement, which most people don"t do. And we"re going to do it in less than three years. We"ll run our old and new systems in parallel over the last two quarters of our fiscal year in North America, and then do the same thing in Europe.
Have there been any major pain points yet? Nothing that a major amount of money can"t help. It is an astonishingly expensive process. No one in their right mind does this. You do this when you"re desperate, and we were desperate. There was no single source of data for anything. And in fact, much of the discussion in meetings went around whose data was more right or less wrong. The weak systems also got called out in the deferred-prosecution deal [that CA signed with the federal government in September 2004] as one of the things that contributed to the problems in the company. The systems were so loose that it allowed bad guys to get in there and do things they shouldn"t have.
Sanjay Kumar"s trial on accounting fraud charges is coming up. Do you expect any fallout from that? The trial starts in April, and we expect more activity around it to start in March. There"s not much we can do at this point. All we can do is tell our story and make sure people recognize that these things are part of the past. It"s certainly part of the history of CA, but it"s not part of the future.
You said repairing customer relationships was part of the long-term process for fixing CA. So that isn"t where you want to see it? Very much so. I hope we"ve moved people from a position of outright hostility to a position of skepticism -- perhaps neutral skepticism. We have to demonstrate by what we do, not just what we say, that we"re a partner worthy of doing business with, and that"s going to take some time. Our intent is to get our customer satisfaction ratings on our internal surveys up to above 80 percent, from somewhere below 70 percent now. Best-of-class is somewhere between 80 percent and 90 percent, and we have some work to do to get there.
It isn"t just a matter of you and other executives meeting with customers? It"s hardly at all about that. Some of that is necessary. Me going out and saying we"re going to be a good partner is interesting, but it"s really how our [sales] team follows up and how we act in the marketplace that"s important.
One of things that Kumar did get credit for from IT managers when he was CEO was improving relations with users. Was that overstated? Sanjay did identify that there was a problem with what I"d call the confrontational model of dealing with customers. The company made some progress on that but then became so self-absorbed with some of the [internal] problems that it became ineffective. Frankly, a lot of that momentum was lost.
What"s happening in your sales force? Your first quarter was pretty turbulent in terms of turnover there. It was, but I think we"re through some of the turbulence. On an annualized basis, we had about 20 percent turnover, which is high but not excessive for software companies. You typically have 12 percent to 20 percent turnover, so we were on the high end of the range -- higher than I"d like to see it, but not crazy. We made a whole series of adjustments and modifications in the sales organization, and changed some of the management. I think we"ve made good strides in transforming it. The old joke used to be that you"d never see a CA salesperson until three months before your contract was up for renewal, and then he"d show up with his hand out.
CA has started to make acquisitions again, buying vendors like Niku, Netegrity and Concord Communications. Does your acquisition strategy differ from the approach CA took in the past? I think it"s very different. CA in the past made opportunistic software acquisitions, and it didn"t really seem to matter what part of the business they were in. To a certain extent, it was a random walk through the software industry because it was more focused on financial aspects than on technology or business aspects. I think that strategy served CA well for a period of time, but it ran out of gas in the mid "90s. All of the acquisitions you"ve seen us make [in the past year], or will see us make, are designed to expand our product portfolio or fill a niche that we haven"t focused on.
Is it likely that you"ll buy more companies in the near future? Yeah. You saw us do seven acquisitions [in the] last year, three of them major. That probably is a little ahead of where I expect to be a year from now in terms of the rate. I don"t expect to do US$1 billion worth of acquisitions in the next 12 months, but I wouldn"t be surprised to see us do $500 million to $600 million worth. In the short term, you get the biggest bang for the buck [in revenue growth] from acquisitions.
CA went back and forth on holding a CA World conference this year. Do you think attendance at next month"s event will be lower as a result? We made a lot of changes to CA World -- we changed the time it"s taking place, we changed the structure and we made it a fee-based conference. I do think attendance will be lower relative to previous years, maybe 50 percent lower. I hope we can attract more attention to it [in the future]. But I think it"s probably a good thing for now to have it smaller and more focused. It gives me a chance to speak to an audience in a more focused way.
In terms of changing the culture at CA, can"t you just say what the new culture is, and that"s that? Cultures build as much from the bottom up as they do from the top down, and you get a culture whether you want one or not. CA has a culture today, but it"s not something that anyone thought a lot about. It was just something that sprouted, and it was different [in this facility] than it was [at company headquarters]. You can communicate what you want it to be, but it"s the building it up and reinforcing it that takes time. People watch what you do, not what you say.