CA Technologies: The Acquirer Is About to Be Acquired
The pending acquisition of CA by Broadcom will raise concerns about support for CA products that competitors will likely exploit to displace CA products with their own. IT managers should seek assurances from CA concerning continued support of their data warehouse-related tools.
- By Mike Schiff
- September 6, 2018
In early July, Broadcom announced that it had entered into a definitive agreement to acquire CA Technologies for approximately $18.9 billion in an all-cash transaction ($18 billion of which is being financed by new debt). The deal is expected to close in the fourth quarter of this year. This is great news for CA stockholders (who are being offered a 20 percent premium to their stock’s price prior to the announcement), but it may not bode as well for CA’s installed user base.
Broadcom, a communications chip manufacturer, is a hardware vendor with almost no software presence. CA is a software vendor with a multitude of products, especially mainframe solutions that (although marginally declining over the past few years) represent the plurality, if not the majority, of its revenue.
The History of CA Technologies
CA Technologies, nee Computer Associates, has had a reputation as the place where software companies with financial difficulties went to be bought out lest their products disappear completely. CA’s tactics, especially the deep downsizing of an acquired company’s staff, were often considered harsh. However, by continuing to support these products, CA provided a safety net for IT organizations and allowed them time to possibly migrate to alternative technologies.
CA’s many database acquisitions look like a walk down a hall of legacy database technology and include (among others) Datacom/DB from Applied Data Research, IDMS from Cullinet, and Ingres from ASK Group. Its stable of acquired products also includes many other well-known products such as Easytrieve, Panvalet, and Top Secret as well as the myriad of products including the widely used ERwin data modeling technology (sold off in 2016 and now owned by privately-held erwin Inc.) it absorbed with its 1999 acquisition of Platinum Technology.
Although relatively few data warehouses may use CA’s database technology as their underlying database engine, many of the operational systems that feed them still might. Furthermore, CA has a multitude of tools and utilities useful in data warehouse environments, including CA Test Data Manager; CA Jarvis, an analytics engine that developers can use to draw insights from large data sets; CA Automatic Workload Automation for data warehouse generation; and CA Project & Portfolio Manager, a project-oriented data mart.
CA has a vast array of mainframe tools such as utilities for databases including both z/OS DB2 and IMS as well as tools such as CA Disk Backup and Restore, CA JCLCheck, and CA SysDump. In fact, I suspect that the plurality of mainframe environments currently deploy one or more CA mainframe tools.
Implications of Acquisition
With the CA acquisition, Broadcom is seeking to diversify and grow its revenues by expanding into the software industry. However, Broadcom is paying a premium price for CA and will likely take a close look at CA’s products to see where future support should be focused. It would be reasonable to assume that some products will, at best, enter a zombie-like minimal support state or even ultimately disappear. This will have ramifications for IT managers and data warehouse practitioners alike.
If they haven’t experienced it already, CA’s installed base should anticipate that CA’s competitors will approach them with migration proposals and create FUD (fear, uncertainty, and doubt) about Broadcom’s future support of CA’s technology. They should evaluate these efforts with a grain of salt while seeking assurances from Broadcom and CA that their products will continue to be supported. This uncertainly may also dampen new CA sales.
I cannot find anything on either the CA or the Broadcom website addressing future support. Although this may be due to compliance issues prior to the completion of the acquisition, CA and Broadcom would do well to take steps to reassure CA’s installed base. For example, Broadcom has cited the recurring revenue it expects to receive from CA’s products and could emphasize that this would not continue if the acquired products were no longer supported.
That said, Broadcom is taking on significant debt to finance the acquisition and will be looking to reduce expenses. Consequently, it would not be unreasonable for the company to weed out unprofitable CA products, especially those with a small installed base for which other CA products could serve as substitutes. Prospects should address this, perhaps with contractual assurances that support will continue.
Although this article is focused on CA Technologies, my advice applies to any software company that is the object of an acquisition. The acquiring company typically looks for ways to reduce costs and diminished support for unprofitable acquired products is one way to accomplish this. Don’t be caught unprepared.
Michael A. Schiff is founder and principal analyst of MAS Strategies, which specializes in formulating effective data warehousing strategies. With more than four decades of industry experience as a developer, user, consultant, vendor, and industry analyst, Mike is an expert in developing, marketing, and implementing solutions that transform operational data into useful decision-enabling information.
His prior experience as an IT director and systems and programming manager provide him with a thorough understanding of the technical, business, and political issues that must be addressed for any successful implementation. With Bachelor and Master of Science degrees from MIT's Sloan School of Management and as a certified financial planner, Mike can address both the technical and financial aspects of data warehousing and business intelligence.