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T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
Below is TBR’s commentary on BMC Software's 4Q10 earnings release. Please feel free to use the below content,
or call/e-mail Jessica Breen (603.758.1852; jessica.breen@tbri.com) for additional commentary.
Although the mainframe business is typically a slower growing market for systems management vendors, BMC
Software grew its Mainframe Service Management (MSM) business 8% year-to-year, as the company continued
to focus on expanding its customer base in emerging markets and increasing its footprint within existing
customer accounts. The recent launch of IBM zEnterprise Mainframe and BMC’s response to managing the
solution with Control-M led to above-average mainframe growth in the quarter. Competitor CA Technologies is
also partnered with IBM to provide management services around zEnterprise, where BMC will have to fight for
customers; however, TBR believes BMC is winning despite CA Technologies’ automation solutions and Mainframe
2.0 Initiative, as CA reported declines in its mainframe business over the last two quarters. TBR believes BMC is
well-positioned to sustain its growth pace in mainframes; the company reported a 37% year-to-year increase in
mainframe license bookings ($131.8 million).
The cloud landscape is bustling with activity in the software industry, and BMC Software is chasing opportunities
under the radar. As systems management competitors Oracle, IBM and CA Technologies make abundant
acquisitions, BMC Software is investing in strategic partnerships, as well as research and development. BMC is
growing its cloud market share through a partnership with Salesforce.com where BMC integrated its Service
Desk offering on top of Salesforce.com’s developer platform, Force.com; the solution allows both companies to
increase market share. As Salesforce.com gains service management solutions for its SaaS applications, BMC
has a new route to market and a way to target smaller customers, who are not BMC’s traditional market
segment. TBR believes BMC’s focus on cloud management and enablement led its Enterprise Service Business
(ESM) to grow 9% year-to-year, which will be sustained with the release of Remedy on Force.com.
While cloud and mainframes are behind in growth in the ESM and MSM business, respectively, acquisitions had a
hand in some of BMC’s reported revenue growth of 6.3% year-to-year. Revenue performance was above
average for a second quarter, as new growth initiative and strategic acquisitions drove inorganic growth. Last
Colossal snow and ice storms can wreak havoc with power outages. Likewise, availability issues cause major
headaches with IT outages. Automation is a cloud enablement market where BMC is focusing its initiatives
around automating processes, mainframe management, configuration, and other management solutions that
enable customers to run more efficient and reliable IT operations. One year ago, BMC Software released its
Business Service Management (BSM) Proactive Operations Initiative that pre-emptively detects and manages
outage occurrences before they become an incident; the value proposition is to increase productivity and reduce
costs. Following up on this initiative, BMC Software’s release of Proactive Availability and Performance will
increase revenue growth in its ESM business unit where TBR believes ESM revenue will grow about 7% year-to-
year in calendar 1Q11.