Mainframes are making a steady comeback
Although the mainframe business is typically a slower growing market for systems management vendors, BMC Software (NASDAQ:BMC) grew its Mainframe Service Management (MSM) business 8% year-to-year as the company continues to focus on expanding its customer base in emerging markets and on increasing its footprint within existing customer accounts.
The recent launch of IBM's 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 (NASDAQ:CA) is also partnered with IBM to provide management services around zEnterprise, where BMC will have to fight for customers; however, Technology Business Research 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, as the company reported a 37% year-to-year increase in mainframe license bookings of $131.8 million.
BMC captures new business as customers move to cloud
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 (NASDAQ:ORCL), 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 (NYSE:CRM), 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.
Cloud and mainframes and acquisitions – putting it all together
While cloud and mainframes are behind the growth in the ESM and MSM business, respectively, acquisitions have 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 drive inorganic growth. Last year’s acquisitions of Tideway Systems and Phurnace are providing new growth, and the integration of Tideway into BMC’s Atrium solutions will enhance the portfolio and stimulate new license growth. TBR believes BMC will round out its fiscal fourth quarter with maintained performance as it pushes to close deals in growth areas.
BMC tells customers, “Don’t wait until the storm to prepare”
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.
A 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.