Being private has helped 36-year old BMC to grow like a startup - with US$2b revenue
By Goh Thean Eu September 15, 2016
- Big technology change puts pressure on tech companies
- Nine consecutive quarters of growth, expects double-digit growth this year
BMC Software Inc, a Houston-based software company, said that the decision to go private has been one of its best moves ever, as it helps the company to implement key strategies smoothly without much distractions.
"As a public company, particularly one like us that deals with brand new technology, everytime a big technology shift happens, there's pressure on companies like ours.
"The pressure is to invest heavily in new things, and to invest in them to get into the market quickly, which will not be profitable for some time," said chairman and chief executive officer Bob Beauchamp at the sidelines of the BMC Engage in Las Vegas recently.
Among the key decisions the company made include changing its business model from perpetual licensing model to a software-as-a-service (Saas) model.
While such a decision can help a company to be more competitive in the longer term, investors may not like the idea, as it could mean a drop in revenue or earnings in the near-term.
"In order to be successful, we were required to spend hundreds of million of dollars innovating on the products, innovating on the go-to-market. We were still profitable, but we took it down a lot as we shifted the money to research and development and our go-to-market strategy, and our board members were thrilled by it.
"But, as a public company, every 90 days I will need to explain to my shareholders and the analysts about why the profits are going down," said Beauchamp, recalling what one shareholder told him years ago. "He said 'Great, I am going to sell your stock and when it starts to go back up I will buy again'."
Privatisation showing early dividends
Since it went private in September 2013, the company's quarterly financial performance is no longer in the scrutiny of the public and analysts. While its revenue may have been affected as it moved from sale of software licenses to the Saas model, it was fast to regain traction.
In fact, the company has grown for the past nine consecutive quarters, both top and bottom-line, and is registering an annual revenue of over US$2 billion (RM8.2 billion) today - which was the same revenue level before it was taken private.
"Now, you can expect to see profits grow by strong double digit this year, and profits are growing because of revenue growth, not expense cuts. So, the strategy works," said Beauchamp.
"The reality is that being private has short circuited the innovators' dilemma crisis, which you could run into when things change this fast."
Today, BMC, via its various solutions, has helped over 82% of Fortune 500 companies in their digital transformation. It also has over 10,000 customers around the world.
Besides its revenue and earnings, the company is also doing a good job in growing its customer base as well as to retain them.
According to Paul Appleby, executive vice president of BMC's worldwide sales, the company's net new customer base has jumped by 33% over the past year, and existing customers are also spending more.
"At the same time, we are operating the business in a far more efficient way than before. We have such strong and sustainable growth that sometimes, we like to call ourselves the 30+ year old startup," said Appleby.
Unveiling of cloud-based Innovation Suite for Developers
During the BMC Engage 2016, the company unveiled the beta version of a new innovation suite for developers. The cloud-based development environment allows developers as well as business analysts to co-create powerful enterprise apps with good user experiences.
"With new revenue streams, operational efficiencies, and new productivity models at stake, enterprises are looking for ways to accelerate digital services and business offerings based on cloud, agile development and platform economy," said BMC's Enterprise Solutions Organisation president Robin Purohit.
The new innovation suite will include following features: Innovation studio, software development kit, library of connectors nd components, BMC's REST application programme interface and Developer Education.
Essentially, the Innovation Suite is designed to allow users to create or make changes to an application.This can be done via a code-less, or low-code environment, where users can create an app or changes certain functionality within an app via a few clicks, or drag-and-drops.
"This is a major step forward in BMC's commitment to developers and building an ecosystem, where we support 'no-code, low-code, and pro-code' developer environment capabilities," said Purohit.
"This new suite empowers business users and enterprise developers to accelerate digital apps and services getting to market through agile app development, and will offer huge competitive advantage to those companies adopting it," he said.
The free Innovation Suite will be available for Remedy and non-Remedy developers to consume and build digital apps. It will be offered on the Amazon Web Services (AWS) cloud computing platform.