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CA ascends to big leagues

Computer Associates may be the most successful company that many have never heard of. Not for long.

NEW ORLEANS--Computer Associates (CA) may be the most successful company that many have never heard of.

Microsoft products adorn nearly every desktop PC that rolls out of your local computer store. Sun Microsystems has made the word "Java" mean more than just a caffeinated morning kick-start. But CA has been known for less complementary reasons in its 20 year existence, namely that the company has no in-house talent and often buys companies for the sole purpose of squeezing revenue from upgrade sales.

Nevertheless, the Islandia, New York-based firm has catapulted itself to the position of third-largest independent software company in the world by focusing on infrastructure software that can house a company's data or manage network resources and computer systems. As the 25,000 faithful in attendance at this week's CA World 97 conference demonstrated, those functions are becoming indispensable for businesses.

Along the way to becoming the No. 3 software maker (after Microsoft and Oracle), CA has gained its voracious acquisition appetite. The company has acquired more than 60 companies since its inception in 1976, and has acquired a reputation--unfairly, say CA executives--for milking the installed base of established software products for upgrade revenue, while providing few new products.

CA also has been accused of having no talent for innovating software. The always outspoken Larry Ellison, chairman and CEO of Oracle, once quipped that CA is the place "where software goes to die."

But CA has finally broken through with a wildly popular product--Unicenter--built by the company's own programmers. Analysts estimate that Unicenter now makes up more than $1 billion of CA's $4 billion in annual revenue.

Now CA is moving to counter claims that Unicenter is a monolithic, proprietary software system that forces users to make sweeping decisions concerning their internal infrastructure management policies and ties them to the platform regardless of whether they like all of its functions.

This week, CA raised the stakes in the enterprise management software market vs. competitors such as Hewlett-Packard and IBM subsidiary Tivoli Systems, by unveiling a new, more flexible strategy that they hope will make Unicenter TNG as ubiquitous as Windows.

CA will offer a subset of Unicenter services to third parties who wish to bundle the technology with computer hardware. More than a dozen companies, which included HP's systems division, Digital Equipment, and NCR, lined up behind the plan. More than 1.5 million copies of the framework will ship with systems in the next year, according to CA estimates.

"At the very minimum, the TNG Framework changes the game," noted a report published by Illuminata analyst Jonathan Eunice. "Any competitor anteing up for the next hand in enterprise management needs its own credible shot at infrastructure ubiquity and transparency."

CA has definitely changed the competitive landscape in the network and systems management software space. Tivoli, generally viewed as CA's emerging chief competitor, believes that CA's emulation of the Austin, Texas-based approach to enterprise management software is the sincerest form of flattery.

"All of a sudden, CA--who supposedly didn't have a framework--is talking about unbundling their framework," observed Mark McClain, director of Tivoli's enterprise business unit. "It's not clear they changed anything technologically in their product."

"We've been at it for seven years, we're on the fourth version of our product," McClain said. "We see it as an endorsement of our approach."

Some industry observers feel that Tivoli now must change their business model to compete with CA's ubiquity play, as Tivoli sells their framework at significant cost to users.

"This is a significant challenge to Tivoli, who has been viewed as the most open player in the space," said Carolyn DiCenzo, director and principal analyst at market researcher Dataquest. "I think they need to go back to the drawing board and rethink the way they are positioned."

In the aftermath of CA's bundling announcement, HP and its OpenView network management software division also appeared to be in a precarious state. Although HP denied that the move was intended to counter publicity surrounding CA, the company announced a similar bundling program earlier this week with Dell Computer in which the fast-growing PC server maker will include a copy of a base OpenView platform with its systems at no charge.

Dell is only the first of several third parties to offer the base set of services, according to Andy Vanagunas, HP's OpenView program manager. CA and HP "are both kind of reacting to the same trend in the industry," he said.

Vanagunas said the applications that run on top of Unicenter's framework, such as a software distribution package, may now be exposed. "It's a different mindset. The difficulty they're going to have is that some of their individual products are not necessarily known as best-of-breed," Vanagunas said. "It's a bold move on CA's part, but now they have to play the framework game."

Others believe that OpenView, long a dominant player in the network management platform space, is in trouble because even the systems division of HP is endorsing the Unicenter framework as the "preferred" management platform for the industry. "You have to really discount OpenView," DiCenzo said.

Some irony accompanies the ascendance of Unicenter. CA has often been accused of having acquired all of its technology, rather than building it internally.

"Our clients are very satisfied with the products. The issues that [people] bring up are old news," said Marc Sokol, CA's senior vice president of advanced technology.

"I think, to a certain extent, there's a vision that CA is a very technical company," Sokol added. "What is unusual is that there is a perception out there by people who do not work with our software, or [who] worked with our software ten years ago, that we're not technical, that we're some sort of financial machine. I think there is now a recognition that that is just not true."

The company's president and COO, Sanjay Kumar, spent an entire morning at CA World this week demonstrating new company technology and stressing the inclusion of standards in the company's architecture. CA also announced a new initiative, dubbed Maximizing the Efficiency of Resources in Information Technology (MERIT), that purports to bring together users, resellers, and partners to broaden and unify the use of industry standards.

"CA knew what people were saying about them and they addressed it head on," Dataquest's DiCenzo said.

And CA remains a darling of Wall Street. The company is expected to announce earnings next week of 39 cents per share, according to consensus analyst estimates compiled by First Call, for its first quarter.