Beauchamp: That's right. Enterprise is going retail. In order to do that they need cloud-based solutions, self-service, customer-requested. They can't have any people involved in this. It's got to be a no-touch environment. This is what I think is fascinating about where we play. When I joined BMC in '88 the job was: Somebody bought something, it was working fine and then it broke one day so they called up somebody else like us to sell them a tool so that wouldn't happen again. Like high-speed backup or red light, green light [management]. Now what they're saying is, cloud is as much about automation and about self-provisioning and service-level management, compliance and transparency as it is about the infrastructure itself. Management actually becomes the delivery mechanism for the application.
Software as a service
Where are you playing on the SaaS front?
Beauchamp: We give our customers the ability to deploy clouds so that they can be providers. We also work with the service providers -- and by the way, outsourcers and systems integrators who want to set up multitenancy environments for delivery systems -- to configure, deploy, and charge and manage cloud-based service platforms.
In the last quarter we announced two major SaaS offerings -- our Remedy, which is, you know, the world's largest IT service-management system, as a service on demand. It's hosted. It's delivered. It's secured. You don't have to go in and set it up in your centers, and you can run it yourself and deploy very rapidly. Also, Salesforce.com announced Dream Force a few months ago. So they now have a service desk on their platform called Force.com that their salespeople actually get paid to sell. And this is not their typical partner deal. This is a special relationship between our two companies.
The other thing we do with SaaS is we sell software to Salesforce.com, Concur, Edmonds, and others who themselves deliver SaaS. They need management just like everybody else needs management.
Behnia: We also can help manage SaaS applications for the enterprise. If you want to know how many licenses you have on your SaaS-based applications, our asset management system has been extended to be able to account for those licenses. If you want to do response time monitoring, you can do that.
The changing role of IT
Behnia: This is a thread that really ties both the cloud piece and SaaS nicely together: We see the role of IT as evolving and changing from being the sole provider of services to the aggregator, broker and the integrator of these services, whether they're internal or external services -- because when there's a problem with Salesforce.com, you don't call Salesforce, you call your internal IT help desk.
Beauchamp: In a sense you're now talking about things like core network services, things that people in that business have always talked about. But now you're now starting to talk about it for the data center. IT becomes this aggregation manager for wherever this stuff sits. And it may very well be there's nothing in your data center. Your data center goes away, even for larger companies. [Instead] it's going to be popping all over the place.
Behnia: We see multisourcing as where people take an individual service and then ask who's the best provider at this price point and efficiency?
Talk about the evolving competitive arena today -- you're dealing with some pretty powerful companies that didn't start as management companies.
Beauchamp: I went to see Jim Barksdale and Marc Andreessen when Netscape was a little company; they were the hottest thing on the planet. I said we ought to talk about enterprise management. At some point one of them said, the whole management layer's going away. There'll be no need for a management layer because the Web is going to make that irrelevant. We're going to have our management products based on Web technologies, and we're going to build a complete management stack. Same thing with Oracle and Microsoft -- I met with Larry Ellison and Jim Allchin and they said the same thing.
Everyone says, "We're going to build a complete management stack." And every time the same thing happens. The customer starts saying: Why are you the logical person I'm buying this from? Am I going to trust Oracle to manage Sybase? So it begins to get wobbly. The other thing that happens is in the vendor's boardroom when they have a bad quarter and money's tight. They're saying, how much money are we spending on management and why? It's outside of our core. So they ultimately bail out.
Now HP started early and they're in it. IBM with the Tivoli deal got in it. And then there's us. And you can argue that CA certainly has a lot of stuff, right?
CA is primarily a mainframe company still, as best as we can tell. They've done some acquisitions of some nice products. And they talk BSM, and they talk cloud computing. I don't take them lightly, and we compete with them every day.
What's the defining philosophical difference between your company, HP, IBM, and CA?
Beauchamp: The management business, in the case of HP, is I think 2.5 percent of revenues. It's an interesting business. But at some point their board of directors has to talk about the other 97.5 percent of the revenue. By the way, [for customers] HP says you really need to use our servers, because the only way you're going to get the full robust capability out of this is going to be on our platform and our storage. There's just an inherent conflict of interest around buying the agnostic management layer from the people that are also selling you the entire soup-to-nuts platform. I would say that in general customers would view that as lock-in.
You're seeing basically a reverticalization of the stacks, like back in the BUNCH days. [Burroughs, Univac, NCR, CDC and Honeywell were mainframe rivals to IBM collectively known as the BUNCH.] You're seeing companies do what they did back then: We've got our own processors, we've got our own OSes, we've got our own services, we've got our own hardware, our own storage, our own app layers, our own management layer. You can buy it all from us. And look how happy you're going to be. And then Oracle came along and said, I've got an idea, why don't we do a horizontal database that runs across all of them, disaggregate what was pricing leverage? And Oracle just went from nothing to gigantic, basically busting those stovepipes.
So then everybody else followed suit. I'm going to be the operating-system company, I'm going to be the database company, I'm going to be the desktop company. I think the same gravity that caused [vertical integration] to fail in [the BUNCH] time will cause it to fail again. The integration is not meaningful. And it gives the vendor enormous leverage.
Behnia: And it's not practical given how much customers have already invested. These aren't green field, brand-new data centers where the customer's going to buy 20,000 brand-new servers and forget about all their 105,000 applications that have been written.
Beauchamp: CA built an incredible franchise back in Charles's [Wang] day just buying up a whole bunch of companies and basically taking that whole space, and saying, if you want one of those, we've got a bunch of them, right? There's nothing inherently wrong with that. It's just a different strategy.
Tivoli almost got it right back in client server. It's just -- the technology didn't really work, and it was client server based -- and some other things. But it was a pretty doggone good story. When that Tivoli framework came out, we looked at buying it. We went into discussions to acquire Tivoli before IBM did, and I was involved in those discussions. I told my boss, if they can do what they say they can do, they're going to put us out of business.
So when I got the keys to the car in 2001, I basically said, let's do this again, but let's do it right this time. Let's not make it a big, heavy framework, and let's break it down into bite-sized pieces. Let the integration occur naturally. When you buy the second piece, it should find the first piece and work together. Not that you can't upgrade this one unless you upgrade this one. We basically just redid the framework thing, modernized it, because it's got to work that way. The world cannot accept hundreds of point products that just manage one thing. It's illogical.
Each new computing paradigm sets up a new set of gorillas. So how big a risk is it that cloud is so different that it's going to open the door to a vendor who approaches management completely differently?
Beauchamp: There's a moment of fear that we experience every time something disruptive and new emerges. Once that wave passes, the next fear for us was: We know cloud's going to be big. We know customers are going to make architectural decisions. We have to win those bake-offs. So we set up a task force across the organization, and we just focus on winning that architectural [bake-off]. So we've got product initiatives. We've got distribution initiatives. We've got marketing initiatives. You know there's support, how we go to market. We're starting to win these deals.
Now the next fear is ... is something entirely new coming along, and management just becomes irrelevant? And a customer told me why he didn't think that would be true. He said: Eventually something is plugged into the wall, right? It's not really in the cloud. It actually is sitting over there and it's running. And so I just don't see the uber-clouds annihilating all the management layers. Private cloud to us is just another operating system inside our existing customer base.
Business service management
How is BSM, a field you're widely credited for inventing, different from traditional enterprise systems management?
Beauchamp: BSM is the general envelope of how we describe what I've been talking about, which is this self-service provisioning, managed service level, transparency and compliance. And ESM is just a name we made up for our business unit that is the non-mainframe business unit.
Here's an example of BSM. Last year a very large seed manufacturer was remaking their IT organization. I met with the CIO right before they standardized on us, and she was explaining to me the rationale. She basically said, look, we're going from -- and I won't get this right -- two mutations per genome or whatever it is in the seed, to an eight-pack so you can plant wheat in countries you couldn't before. And, she said, in order to do that, they have environments where their scientists need to run simulations that are unbelievably computationally expensive to do.
Sometimes those are just sandbox activities. So in that case they want to go outside. They use a university's grid environment to do a slow computational; it gets it done and just uses whatever resources are available at the time, kind of a grid model. And then when they go to run their big test and they really have to certify it for the government, they want to run it inside on their very scarce resource -- a very expensive, computational platform.
And what they want is people to just request a service, and they want the engine to decide, am I going to jump over here to the university grid, am I going to go run it on the inside physical environment that already exists? Do I need to pick up a new VM on another machine to run it inside that environment because it needs to be segregated for compliance reasons? By the way, that's getting really complicated. They want our software to be the common portal for the "store" where you go to request it, the common engine that decides where to host it, provision it on those environments, maintain the service level, and then report on it.
This is our value proposition around business service management, how we deliver it. And cloud is one module inside of that.
You've used the term "ERP for IT." Where are you on the journey of delivering that?
Beauchamp: Well, we are a little cautious about using that term too much. Some customers just love it, but some people will equate it to the things that didn't go well in the ERP generation. You know, you're going to do it our way, and it's rigid, and it's going to take three years, but it's really going to take three-and-a-half, and it's going to cost a hundred million, but it's really going to cost four hundred million. So we don't use that term externally, really.
But internally we'll refer to it that way sometimes, because what we're really talking about is full lifecycle management for services, where if it works right it turns into a management link, a hub and everything that plugs into it gets commoditized. If you can get an Ethernet cable into the thing, we can discover it, and we don't care what it is, we can manage it. You could swap out one vendor and plug in another. So you really begin to disaggregate the stacks of IT, which is the exact opposite of what HP and IBM want to do. They basically need those stacks.
Behnia: I think where we are on that journey really depends on the maturity of the individual enterprises. Different enterprises are at different maturity steps. One of the things that we did in the design of our architecture is to make sure that customers could deploy this as they go. So that we're not overshooting their capabilities or their needs. And this is one of the big differentiators for us, and where the analogy for ERP breaks. Because many of the ERP solutions were very monolithic.
Beauchamp: If you hire us to do it, we can get you a long way to it right now. It's not as cookie-cutter as it needs to be. But we're doing it for customers now on a regular basis. Every quarter we're taking the rough edges off -- where this product and this product connect. It's just in the productization of the whole thing. We still have to go in with experts and help you configure it and get it set up and interview you. And it's still got a services element that's a little rich.
Acquisitions and partnerships
You've described the BladeLogic deal as a "transitional" event for the company. Did it really turn out that way?