Buying Into A Big Time BrawlEvan I. Schwartz
When Computer Associates International acquired Applied Data Research and Cullinet Software in the late 1980s, it was more than just another step in Chairman Charles B. Wang's expansion plan. By taking over two leading makers of mainframe data-base programs, CA stepped up in class--from a specialist in esoteric software that manages the inner workings of mainframes to a supplier of the key software that cuts to the heart of most big businesses.
In the process, though, CA bought itself into a nasty fight with IBM. Big Blue owns half of the market (chart) and is counting on DB2, its newest data-base package, to help keep the mainframe gravy train on track. To be more competitive, IBM says, corporations should rig information networks anchored by mainframes that use DB2 to dole out data to small computers in remote offices, factories, and warehouses. "It's the way of the future," says Russell Donovan, IBM's manager of data-base market support.
That's a pretty convincing pitch--especially when IBM backs it up with deep discounts for customers who switch to DB2. But CA has its own persuasive arguments. "IBM keeps talking about the future," says Wang. "What about the present?" In the here-and-now, he notes, customers have spent billions of dollars on programs and data for older data bases such as IBM's IMS. And while new "relational" data bases such as DB2 make programming and fetching information easier, they don't work with files stored in older IBM data bases. That's a task at which CA's data bases are actually more adept.
WRONG EARS. CA's answer: Don't switch, keep your old files and beef up the old programs by adding few relational features supplied by CA. That's a nice option, since analysts figure a big company could spend $100 million converting to DB2. George Emmanuel, chairman of the largest CA data-base users group, is sticking with CA even though the new features for the Cullinet package he uses won't be ready for at least six months. He says he'd rather wait than "leave everything behind and start from scratch."
CA's problem is that its blandishments often fall on the wrong ears. The company grew up selling software to technical experts in data centers. But data-base software is so important to companies that high-level officers, sometimes including the CEO, make the buying decision. IBM salespeople have an edge in their strong ties with top-tier management. Wang acknowledges it: "We don't get at the CEO often enough."
Yet, despite years of trying, IBM hasn't prompted a massive shift to DB2. Companies such as Hughes Aircraft Co., where Emmanuel works, are now installing DB2 for their new jobs. But Hughes still uses Cullinet's IDMS in purchasing and manufacturing.
Still, DB2 is gaining momentum. A Computer Intelligence Corp. survey indicates that 50% of mainframe customers plan to install DB2 for the first time sometime soon. Only 5% say they plan to add CA data-base products. That, says IBM's Donovan, is because DB2 is key to bigger software schemes such as Systems Application Architecture, an IBM plan to help tie different sizes of computers in networks.
Pitting CA's $360 million mainframe data-base business against the $63 billion brawn of IBM may seem futile. Indeed, battling IBM so weakened Cullinet and ADR that they sold out to CA. But, Wang insists, customers can't switch overnight, and CA's programs are becoming more competitive all the time. That should make the contest less lopsided.