Ca technologies bringing the cloud to earth case analysis

9-611-047 JUNE 27, 2011 MARCO IANSITI KERRY HERMAN CA A Techn nologie es: Brin nging th he Clou ud to Eaarth ve watched every evolution and a revolution in this industtry, and we’re at another infflection point. Cloud I’v compu uting is going to t happen for sure. s Write it down. d Put my n name on it if yyou want to. — William m McCracken, CEO1 It was barely 7:00 7 a.m. on a cold mid-M March 2011 m morning. Adam Famularo,, general man nager, Cloud d Computing g business, CA A Technologiies, had just spent 30 min nutes with Daavid Dobson n, EVP and group execu utive, Custom mer Solution ns Group, aat the comp pany’s Manh hattan officess. CA Techn nologies, a $4.4 $ billion company c hea adquartered in Islandia, New York, sells inform mation technology (IT) sy ystems mana agement and security sofftware solutio ons, primarilly to Fortunee 2000 companies and go overnments su upporting th hese organizattions’ IT env vironments. O Over the pastt year, CA Teechnologies had h launched a new strateg gy and underrtaken a restrructuring to reeorganize thee firm, and had h made a nu umber of stra ategic acquisitions—includ ding softwaree firms 3Tera,, NetQoS, Nim msoft, and Arcot A Systemss—which strengthened its cloud compu uting offerings. Fa amularo had been b working g on a strateg gy presentatio on Dobson w would deliverr to an audien nce of prominent CEOs, chief inform mation officerss (CIOs), and d chief techno ology officerss (CTOs) in a few weekss. The presen ntation focuseed on commu unicating and positioning CA Technolo ogies’ new strrategy for cloud c compu uting. Cloud computing,, described by some ass revolutionary, by som me as evolu utionary, and by b some even n as “disruptiive,” enabled the delivery of virtually liimitless IT cap pacity as a seervice over th he Internet. Fa amularo and Dobson had reviewed sev veral analystt reports as th hey prepared d the presenttation. 2 Analy ysts valued CA C Technolog gies at about $12.45 $ billion in early Janu uary 2011; ho owever, the reeports were a bit of a mixed m bag ov verall. On thee one hand, m many analyssts had been bullish abou ut CA Techn nologies in thee summer and fall of 2010,, citing the firrm’s tradition nal mainframee business, itss suite of virrtualization an nd security products, p the increasing m move of enterp prises to the ccloud, as welll as a new mainframe platform p releease from IB BM that wou uld mean ren newals and upgrades fo or CA Techn nologies clien nts. Additiona ally, analysts had h called ou ut the several 2010 acquisittions—particu ularly 3Tera a and Nimsofft—as strateg gic additions to the comp pany’s portfo olio. On the other hand, some analysts had voiceed caution, highlighting h CA C Technolo ogies’ need to o clearly statte its strategy y and objecttives and ideentify a com mpelling way to position and differen ntiate its clo oud offeringss. The indusstry was rife with mergeers and largee companies gobbling up p smaller staartups, often n as a defen nsive move, ra ather than forr any strategic or product alignment reeasons. Witho out a clear straategy, these kinds of acqu uisitions weree likely to fail. _______ _______________ _______________ ________________ ___________________________________________________________________ Professo or Marco Iansiti and Assistant Directo or Kerry Herman, Global G Research Grroup, prepared thiis case. HBS cases aare developed solelly as the basis forr class discussion. Cases are not inteended to serve as endorsements, e sou urces of primary daata, or illustrationss of effective or ineeffective management. Copyrig ght © 2011 Presiden nt and Fellows of Harvard H College. To T order copies or request permission n to reproduce maaterials, call 1-800-5545-7685, write Ha arvard Business School Publishing, Bo oston, MA 02163, or o go to www.hbsp p.harvard.edu/edu ucators. This publicaation may not be d digitized, photoco opied, or otherwise reproduced, posteed, or transmitted, without w the permisssion of Harvard Bu usiness School. This document is authorized for use only by Jennifer Armatis (JARMATIS1973@GMAIL.COM). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org or 800-988-0886 for additional copies. 611-047 CA Technologies: Bringing the Cloud to Earth Famularo thought back over the criticism CA Technologies had weathered; industry pundits claiming that the mainframe—CA Technologies’ bread and butter—was dead and would go away. In fact, he had the opposite “problem.” In 2010, analysts reported that CA Technologies’ mainframe business was strong and accounted for over 60% of the firm’s revenues and a majority of its profits, with no sign of slowing down.3 Moreover, Famularo knew CA Technologies’ line of products was anything but outdated, having evolved to include solutions to help enterprises manage and secure their increasingly complex IT environments, incorporating mainframe and distributed platforms, web services and an expanding array of mobile devices. But given the attractiveness of CA Technologies’ current mainframe and distributed business lines, how firmly would the company back the emergent cloud business? How would the company handle technological evolution and its associated need for transformation? What would CA Technologies need to do to drive the growth of its cloud business? What strategies, systems and processes would have to be put in place to drive scale and profitability? Most importantly, should CA Technologies’ cloud business be positioned as an incremental, complementary addition to its mainframe and client-server businesses or should it be framed as a disruptive and entirely revolutionary technology? Company Background In 1976, Charles B. Wang and Russ Artzt, fellow-Queens College mathematics graduates, and a handful of colleagues founded New York-based Computer Associates. “We both had an entrepreneurial spirit and we wanted to innovate and build something,” recalled Artzt, CA Technologies co-founder and vice chairman. Information technology management at that time presented significant problems, with “lots of gaps,” said Artzt, such as the lack of secure and protected master data files. At that time, data was stored on disks or magnetic tape, and, according to Artzt, “anyone could potentially change or delete the data on the file. There were no controls.”