BMC Treads Carefully Among The Giants

Since its founding in 1980, BMC Software has been successfully delivering management solutions to large enterprises. During that time, the vendor has been able to deftly maneuver around possible potholes to earn a top position (one that generated more than $2 billion for the company in fiscal 2011) in this highly competitive market sector.

But more work remains. Like other high tech segments, the management segment is experiencing slowing growth. The double-digit increases evident historically have given way to single digit growth. "There is a good possibility that consolidation will occur among the top tier management companies in the next few years," notes Jean-Pierre Garbani, VP at Forrester Research.

BMC may be a company ripe for the picking. The vendor is much smaller than behemoths such as HP, IBM, Microsoft and Oracle. To avoid being swallowed up, BMC has focused on delivering high-level management functions, such as end user experience monitoring and cloud management. Time will tell if it is positioned well enough to withstand future market shifts.

Even though the economy has recently been wallowing, BMC has fared well. In 2011, its sales increased 8% from the previous year. "BMC has done a good job anticipating customer needs," says Mary Johnston Turner, research VP, Enterprise System Management Software, IDC.

Companies are searching for ways to leverage their IT systems. "With budgets being constrained, corporations are looking to increase staff efficiency through automation," explains Matthew Selheimer, assistant VP of Solutions at BMC.

BMC moved in this direction with its Business Service Management (BSM) initiative. These tools enable IT departments to manage their business services from service definition through service request to provisioning and configuration. The tools are designed to help enterprises monitor infrastructure performance, as well as generate the reports needed to ensure governance.

The movement to cloud computing has presented a significant challenge to established management suppliers like BMC. Its products were built to monitor traditional enterprise data centers rather than operate over network connections, the model that cloud computing relies on.

Consequently, management vendors spent much of the previous few years revamping their products to support and be available via a cloud delivery model. BMC began delivering its Remedy help desk software in a cloud model at the end of the second quarter in 2010. Also, the vendor has been enhancing its management portfolio so it provides IT organizations with a unified view into physical, virtual and hybrid cloud environments.

In addition, IT department have been moving away from a component-level picture (what is happening on this switch) to a more comprehensive (where are my bottlenecks?) management view. In response, BMC purchased Coradiant, a maker of software for improving end user experience and tracking Web application performance, in April 2011. The technology competes with vendors such as Compuware, Keynote Systems and OPNET, and allows businesses to track the performance of on-premises, virtual and cloud-based applications. With the product, IT departments can pinpoint usability issues with enterprise applications, thereby increasing worker productivity, or they can ensure that their public portals and e-commerce sites are delivering information quickly.

Mobile management has been another area of burgeoning interest. BMC took one step in that direction in July 2011 with the purchase of Aeroprise, whose software tied Research in Motion BlackBerrys and Microsoft Windows Mobile smartphones to BMC’s Remedy help desk application. But BMC still lacks tools so that companies can track and secure mobile devices.

BMC seems to be accurately tracking evolving customer desires. However, the company remains one of the smaller management vendors. With management requirements becoming more complex and more comprehensive, the need for suppliers to expand (both product lines and sales) has become clear. Competitors like HP, IBM, Oracle and Microsoft are literally 30 to 50 times larger than BMC, so they have more ways to leverage sales of their management systems.

Given its more than 30 years of independence, BMC has no imminent plans to be acquired. However, long term, the company may need to do more than just nibble away at competitors' market share. In mature markets, the handful of top suppliers eventually gives way to a few vendors. BMC would like to remain in that grouping, but its market position is not guaranteed.

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