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(Business Daily Update Via Thomson Dialog NewsEdge) Author: dai For software maker CA, transformation is clearly a buzzword. The US company, founded by Chinese-American Charles Wang, had a high flying past. In 1999, its annual revenue hit US$5.6 billion, trailing only Microsoft and IBM. Yet, in recent years, CA, formerly known as Computer Associate International, has been hit by a series of setbacks including accounting irregularities, which have chipped away at its past glory and reputation. Revenue growth has also slowed down. In the fiscal year 2005, its revenue totalled US$3.5 billion, down 60 percent compared to 1999. This is why transformation has become crucial to CA to restore its glory. In the eyes of company executive vice-president and chief marketing officer Donald Friedman, CA is now getting back on track and is set to cash in on the evolution of the global software industry. China, he says, is going to play a major role in the make-over. "The information technology (IT) industry is experiencing fundamental changes (such as industry consolidation and increasing demands for integrated products). CA is in the best position," Friedman says. IT management CA used to provide more than 1,000 software tools ranging from network management, security, and databases to applications. Now it is focusing on integrated solutions called IT management. "CA is a unique company," Friedman says. "It's the only software company focusing on IT managementthe priority for managing IT is to simplify or unify the problems, regardless of software and hardware." "There is a lot of pressure on CIOs (chief information officers) to deliver higher efficiency," he says. Nowadays, companies seldom place an order for a single software product from a single company. This means they need integrated IT management solutions that can help streamline operations and improve efficiency, which is crucial to stay competitive in a quickly changing business environment. To adapt to the market changes, Friedman, an IBM veteran who joined CA last April, has been reshuffling CA's marketing strategy and sales organizations drastically. He has helped to change CA's regional chiefs in the United States and Europe as well as its global product marketing strategy. He even implemented a new logo, new ads agencies and new sponsorship strategies. In China, CA is planning a greater revamp of its marketing strategy. "The global software market is growing at an annual rate of 7.8-7.9 percent," he says. "But if you look at the Chinese market, it's growing 21 percent." CA entered the Chinese market in 1995 and now has more than 400 employees in the country. As it is founded by a Chinese-American, CA has always been active in investing in China. In 1985 the firm established a wholly foreign-owned enterprise in Beijing and launched a China Technology Centre in 2000. In recent years, CA has established a customer base in China's government, finance, telecoms and manufacturing sectors. Yet, China still contributes a small portion to CA's global sales. The reason for this is flawed sales channels in China, according to Gavin Selkirk, senior vice-president of sales, Asia-Pacific and Japan at CA. "We would be arrogant if we thought our direct model is going to be right," he says. Previously, about 90 percent of CA's sales in China are based on the so-called direct model, under which CA's sales people sold software products and services to customers directly. The direct model has resulted in limited market coverage as CA's sales force in China has been unable to fully cater to local customers' demands. Selling with partners It's already a common practice for a great number of global technology giants such as IBM and Hewlett-Packard to join with local partners to provide technology offerings to local customers. A partner programme can help the technology firms extend their reach. The partner programme is more important in China, which is a huge and geographically complicated market. For instance, 100 percent of sales of global networking giant Cisco Systems are sold to China-based customers via its local partners. "We have been investing heavily in indirect channels in China," Selkirk says. In the fiscal year 2006, CA China has been aggressively recruiting local partners and certificated nearly 200 sales people and technology engineers working as its partners. Sales via partners have recorded double-digit growth. CA China executives earlier said they hope 95 percent of the company's sales in the country would be realized via partners in the future. CA is now betting on its revamped sales strategy to boost its growth in Asia-Pacific, which is crucial to its transformation in the coming years. "Japan, India and China are tremendously important for CA," Selkirk says. "We have made great progress in the past 18 months and seen great willingness of local partners in China to work with CA more closely." CA last November established a regional headquarters in Hong Kong to oversee its operations in Asia-Pacific and Japan. Such an arrangement could help CA better take advantage of opportunities in the Asia-Pacific market. According to US research firm IDC, security software sales in the Asia-Pacific, including Japan, is projected to hit US$3.16 billion by 2009 compared to US$1.96 billion in 2005. IT spending in India and Japan will grow at a CAGR (compound annual growth rate) of 18 percent and 13 percent during 2004-08. "China represents wonderful opportunities. In 15 years, China will exceed Japan (in terms of GDP)," says Selkirk, adding CA has been working out an "optimized" strategy for the Chinese market. Now it's time to get moving. "Investing in China is our top priority," he says. "We will make substantial investments in organization structures in China in the next couple of quarters. We'd better prepare ourselves to work with our partners." CA last month announced it is cutting 1,700 employees globally which could help the firm save US$200 million in costs annually. Selkirk says China will not be much impacted by the lay-offs. "We have very lean operations in Asia and China," he says. "We have very strong business fundamentals in the region."
Copyright 2006 Business Daily Update Source: Financial Times Information Limited - Asia Intelligence Wire.
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