A tale of 2 emails

In my inbox this morning. The emails started:

1. CA reported disappointing F2Q13 results as both the macro environment and factors specific to CA contributed to the underperformance for the second consecutive period.

2. SWI (SolarWinds) easily exceeded 3Q expectations

Just one data point among many of course, but it’s pretty clear to me.

New wave IT mgmt vendors are growing like crazy: SolarWinds, Service-Now, Splunk, New Relic, AppDynamics. Incumbents are actually shrinking.

The shift to new IT infrastructures is causing the incumbents to be rendered legacy. They need to acquire and then get out of the way and let the new vendors run/grow their own business.

Two problems though:

First, the traditional methods that the incumbents use to value companies for acquisitions need to go out the window. They have to realize that they are in a death match and fighting for future relevance. How many spreadsheets did Facebook run when it acquired Instagram (OK, maybe an extreme example but you get my point) – maybe VMWare/Nicira is a better example.

Second, for some reason, they find it really difficult to leave the acquired companies alone.

e.g. take a read of this article published today http://www.cxotoday.com/story/cultural-integration-is-key-to-our-successful-acquisitions/ and in particular this paragraph….

Acquisitions bring along challenges such as culture clash. How has CA been able to address these issues inspite of its acquisition spree?
This is something CA has continued to better over the years. I myself joined CA, when it had acquired Netegrity. What CA has learned to do is to provide a little autonomy to the acquired organizations and give them time to get used to CA’s culture. For example, couple of years ago when we acquired Nimsoft, we ran it as an autonomous unit and only now have we merged it with proper CA. During the last two years, we worked together and closer with the Nimsoft team and also enabled Nimsoft to leverage the assets of CA and the relationship with CA without losing the integrity of Nimsoft’s spirit.

Another reason we are successful at acquisitions is because we integrate the culture of the new organizations. However, this is not easy and neither it works all the time. We also lose a few individuals in the process but we still manage to retain a major chunk of our human resource.

Uh oh, pinocchio.

The shift is on….

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