SHAKEOUT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00191R000100070026-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 23, 2016
• Document Release Date: October 24, 2013
• Sequence Number: 26
• Publication Date: March 14, 1988
• Content Type: OPEN SOURCE

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Declassified in Part - Sanitized Copy Approved for Release 2013/10/24: CIA-RDP90-00191R000100070026-8
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"There is a -"
shakeout occurring
in mainframe
software and it's
our guess there are
some who won't
make it."
?Dennis Strigl, President
and CEO of ADR Corp.
"Look as far
ahead as your
clients can see,
and you had better
be a step ahead-ft(
them
,r7Charl
Comput
"If you look at our
history there's
always been a lot
of crises...one
about every two
years."
?John Cullinane, founder, Cullinet
Software Inc.
PAGE 12
Declassified in Part - Sanitized Copy Approved for Release 2013/10/24: CIA-RDP90-00191R000100070026-8
Declassified in Part - Sanitized Copy Approved for Release 2013/10/24: CIA-RDP90-00191R000100070026-8
TV
CieriTWARE SHAKEOUT
'There is a shakeout occurring in
mainframe software and it's our guess
that there are some who won't make
it." So says Dennis Strigl, president.
and CEO of Applied Data Research.
And, indeed, this oversaturated mar-
ket is experiencing growing pains as
business shifts from the traditional
leaders to upstarts that can recognize
changing needs.
This Darwinian struggle is made
more complex by mergers, acquisi-
tions, and strategic alliances. But
while it remains unclear which ven-
dors will be shaken out, it is obvious
that the torch has passed from tradi-
tional leaders such as Management
Science America and Cullinet Soft-
ware to hungry, newer firms like
Computer Associates.
Strigl's sentiments echo industry
observers during a week in which
MSA reported a $71 million loss for
fiscal 1987. By most accounts, indus-
try leaders continue to hold strong
cash positions, meaning that they
won't be driven out immediately.
But plump financials make several
firms attractive takeover targets.
"There'll be acquisition by large
companies of medium companies,
and by medium companies of small-
er companies," predicts Charles
Newton, whose research firm, New-
ton-Evans, has just completed a
study of the mainframe software
market. "You're also going to see the
big companies acquire companies
that might even be larger than them-
selves." Newton believes that any of
the larger companies could make an
acquisition or could be acquired.
Shakeout, Fallout
Companies outside the market may
also be set to acquire a software com-
pany, according to Newton. GM's
purchase of EDS could prove just the
first of many. AT&T, for one, has
stated its intentions to purchase a
software manufacturer (Information-
WEEK, January 25), and it may be
reexamining its shopping list.
Two of the more attractive targets
are MSA and Cullinet, with the latter
recently reporting a third-quarter op-
erating loss of $18.4 million. And, ac-
cording to David Eskra, the CEO of
Pansophic Systems, his competitors
are themselves to blame for their cur-
rent predicament. "MSA has stuck to
a particular area and it's a dying
one," he says. "Cullinet stumbled
because a technology came along
that they were locked out of, and the
customers suffered because they
were locked in to Cullinet."
"I don't think some vendors had a
clear view of what was going on in the
industry," notes Dean F. Redfern,
corporate vice president at McCor-
mack & Dodge. M&D, he says, has
turned a profit in each of its 19 years
through long-range planning.
"I think you have to look as far
ahead as your clients can see," says
CA chairman Charles Wang, "and
you had better be a step ahead of
them." Cullinet and MSA, notes
Wang, recognized the shifting re-
quirements of the software market
but they didn't execute the metamor-
phosis effectively. Wang believes
these vendors failed at acquisitions,
which happens to be CA's strength.
From its very beginning, CA's strat-
egy has been to move in any direction
that offers strong revenue potential,
which has led it into areas that include
IBM midrange applications, PC hard-
ware platforms, and the DEC VAX
environment. "We want to be the
ones that can solve all of the software-
related problems in
data processing," ex-
plains Wang. "That's
impossible, but that's
our goal."
Wang refuses to
comment on wheth-
er CA will try to ac-
quire or merge with
a traditional leader in
the field. But Law-
rence Ellison, presi-
dent and CEO of Ora-
cle, states, "There
will absolutely be a
shakeout, and among
the likely acquirers
will be CA."
_ CA's track record
serves to back- up
Ellison. During its
12-year history, it
has gone from a one-
product firm to the
COMPONENTS
ANALYSIS TOOL
INTERFACE
DATA
DICTIONARY
INTERFACE
SCREEN /REPORT PROTOTYPING SPECIFICATION ?
PAINTING FACIUTIES FACILITIES
FACILITIES
MAINFRAME OR PC
TEST
FACILITY
APPUCATION
USER
Sign of the times: Pansophic is writing its popular Telon program to run on multiple platforms
March 14, 1988 ? Information WEEK ? Page 9
Declassified in Part- Sanitized Copy Approved for Release 2013/10/24: CIA-RDP90-00191R000100070026-8
Declassified in Part - Sanitized Copy Approved for Release 2013/10/24 : CIA-RDP90-00191R000100070026-8
THE WEEK
COVER STORY
Redfern: Some vendors didn't see what was happening
largest independent software ven-
dor in the world, with much of this
growth fueled by acquisition. CA
could swallow not only a small ven-
dor, but a large one.
Center Of The Quake
One of the main forces driving the
industry shakeout is MIS executives'
demands for business solutions.
Software that doesn't meet that crite-
rion doesn't get bought. So MIS is
turning away from the more estab-
lished, but slower moving, develop-
ers and looking to the newer, more
aggressive manufacturers or bring-
ing development in-house.
"We need a bigger concept than
what's out there," explains Gary
Watson, director of information sys-
tems at Georgia Tech and a user of
MSA software, which he says "has
all the financial applications and
they do most of those very well._But-
it's too narrow_a_scope.../We need
integration in products."/
-That's-an area MSA has yet to fully
address and one that has left the 25-
year-old Atlanta firm in a state of flux.
Last week exemplified its troubles:
Along with its dismal financial report,
MSA announced the resignation of
yet another high-level executive, Phil
Ross, vice president of application
technology and research.
Manufacturing Division president
Dennis Vohs resigned last month and
Marketing and Development division
senior vice president Larry Smart an-
nounced his departure two weeks
ago. In addition to its
huge loss, MSA's total
assets fell from $261
million in 1986 to $207
million last year?in-
cluding a drop in cash
from $48.2 million to
$24.1-million?
MSA, however, is
.-, _ _
ust the latest in ai
(
string of companies-
sitymied by MIS _de=___
pands-for-ven-driis to]
- -
(support multiple plat-_,
forms, provide inte-J
#ated solutions; and,
basically, do more than
just push software.
Those vendors that
have relied strongly on
one product are feeling the effects.
One is Cullinet, which played to its
strongest hand, IDMS/R, and is still
reeling from the release of IBM's DB2.
Cullinet continues to be hindered
by its heavy investment in the IBM
mainframe database market and the
fact that its own relational SQL-
based solutions were brought to
market late. "If you look at our histo-
ry, there have been a lot of crises?
one about every two years," ac-
knowledges John Cullinane, who
founded the company in 1968.
Cullinet is now moving toward
multitiered, multivendor integra-
tion. It has gone through a major
internal restructuring and has spent
$100 million in the past two years on
THE ISSUES:
O. MIS chiefs, vendor executives,
and industry observers see a
shakeout in the saturated main-
frame software market.
Users are turning away from
single-source vendors and de-
manding product integration.
MSA, in the wake of Cullinet's
announced third-quarter loss of
$18.4 million, posts a loss of $71
million for fiscal 1987.
P. Aggressive firms such as CA
may see potential takeover tar-
gets among the established soft-
ware vendors.
acquisitions and internal product de-
velopment. But can Cullinet bounce
back? "If they can pull it off, their
DEC VAX applications will be their
savior. If they can't, they have no
other insurance," says Jeff Lee, senior
marketing manager at Focus Re-
search. No savior, no rebound. In that
case, a company such as Cullinet may
survive only if it's taken over.
A Brave New World
Some mature vendors, however,
have coped well with the changing
tides of computer software require-
ments. "Software AG has had 22 prof-
itable quarters in a row, so I don't see
us in the same boat as these other
companies," says E.L. Pearce, execu-
tive vice president of systems market-
ing. He says the four key factors in the
17-year-old company's success are "a
good architecture, a good product,
the ability to adapt to change, and
excellent services."
Pansophic's Eskra agrees, adding
that his company's goal is to not tie its
users to its technology. He expects
Pansophic to deliver portable technol-
ogy, using languages such as C and
Pascal, to its users in the next three to
five years. The company's fastest-
growing product, Telon, is being re-
written to run on multiple hardware
platforms. According to Eskra, "Users
want to continue to take advantage of
new technology and they can't if
they're locked into a single vendor."
And users strongly agree. "Single-
source vendors become insensitive
to feedback, they get wrapped up in
their immense size and they don't
have the time or resources to listen
to the customer," points out David
Godfrey, assistant director of data
processing at Travelers.
But when the dust settles, the
shakeout in the mainframe software
industry may leave fewer vendors
from which MIS can choose. If the
larger companies continue to falter,
there is a stronger possibility of more
mergers and acquisitions?creating
a situation in which a company like
CA thrives. And when it comes to
acquisitions, predicts Focus Re-
search's Lee, "CA isn't done yet."
?John J. McCormick with
Christopher Maynard, John P.
McPartlin, Mike Fillon, Atlanta
March 14, 1988 ? Information WEEK ? Page 10
neclassified in Part - Sanitized Copy Approved for Release 2013/10/24: CIA-RDP90-00191R000100070026-8 Nor