Doing the Deal
Computer Associates: Back In Services Hunt By Nick Wakeman Staff Writer Computer Associates' acquisition of a small, Cleveland-based consulting company will expand its federal market reach as the software giant targets new business in electronic commerce and supply-chain management. The Aug. 5 purchase of Realogic Inc. kicks off a renewed effort by Isla
Computer Associates: Back In Services Hunt By Nick Wakeman
The Aug. 5 purchase of Realogic Inc. kicks off a renewed effort by Islandia, N.Y.-based Computer Associates to build a $1 billion-plus services unit through acquisitions and internal growth.
"An area we have experience in - and we see the federal market spending money on - is electronic commerce," said David Weyher, vice president of Realogic's mid-Atlantic region, based in Arlington, Va. Another area is supply chain management, he noted. Earlier this year, Realogic built an online procurement system for the Department of Energy that linked 4,000 vendors to the agency, Weyher said. The system allows the agency to solicit and award bids electronically. "Electronic business is going to be a very integral part of how the government is going to increase its productivity and be more responsive," he said. Government agencies procure, inventory and distribute large amounts of products, but much of it is a paper-based system, Weyher said. "There are a lot of technologies out in the marketplace that can help," he said. "So with all of CA's contracts and the ability to tap into deeper pockets, I think we can start to put a focus in the federal government around supply chain management. "CA has a sizable federal presence, and I think immediately we are in the federal business," Weyher said. For instance, Realogic now has access to Computer Associates' contract vehicles such as NASA's Scientific and Engineering Workstation Procurement and the Navy's Super Mini Computer Program. Realogic officials steered clear of the federal market because they knew it would be difficult for a small company to gain entry, he said. "But we always knew that we would [enter that market] when we were big enough." The market research firm Input of Vienna, Va., expects the electronic commerce market in the federal government to grow from $243 million in 1997 to $309 million in 2002. The growth is even more explosive in the state and local market. G2R Inc. of Mountain View, Calif., estimates the state and local market will soar from $660 million in 1998 to $5 billion in 2003. Computer Associates is making its services push in order to keep ahead of its chief rival, Tivoli Systems Inc. of Austin, Texas, said Linda Saytes, an analyst with the market research firm Dataquest of San Jose, Calif. Tivoli has built a strong services business with the help of IBM Corp., which bought Tivoli in 1996. "IBM has had one of the best services organizations since Noah built the ark," Saytes said. Tivoli and Computer Associates are the leaders in the global $7.4 billion systems management software market, she said. Computer Associates had about 42 percent of the market in 1997, and Tivoli had 28 percent, according to Dataquest. In the network infrastructure and framework market where Computer Associates and Tivoli play, the need for services is especially acute, Dravis said. "The problems Computer Associates is trying to solve are among the hardest things to deal with, which is managing the disparate technologies that are supporting their business needs," he said. The acquisition is a good move for Computer Associates, said James Mendelson, an analyst with Soundview Financial Group of Stamford, Conn. "You could argue it is a baby step," he said. "This is not exactly a terribly large company, yet it is a reasonable size, so it represents a beginning. It gets them started."
Doing the DealBefore linking up with Computer Associates, Realogic was headed toward an initial public offering, said David Snyder, chairman, president and chief executive of Realogic."We clearly were not infatuated with that process, but it was what we needed to fuel our growth." he said. But then Snyder met with CA officials, and "we hit it off immediately," he said. The deal took about two months to complete. Realogic also was entertaining offers from five other companies, Snyder said. But "I liked Computer Associates' strategy. It was very technology agnostic; it wasn't product-centric." |
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