Computer Associates International, Inc.
A leader must be able to make change happen.
“The IT industry is rife with ‘visions,’ but too often fails to deliver on its pronouncements,” says Sanjay Kumar of Computer Associates. “It’s not enough to recognize the need for change. A leader must be able to make it happen, by guiding an organization through the process and driving transformation throughout a company’s culture. To do that quickly and effectively, a leader must have both the ability to build consensus and the willingness to decide actions when necessary.
“Computer Associates has succeeded as a cutting-edge technology company because of its ability to change—time and again—to meet the demands of a dynamic business. We owe our agility to the exceptional quality of our people, who are quick to recognize challenges and opportunities, and coalesce around a strategy for success.
“Moreover, because they are engaged in producing innovative enterprise software that solves real business problems, our people have intimate knowledge of our customers’ evolving needs, which inspires them to become agents for change in their own right.
“In leading the most talented software developers, product managers, and business unit executives in the IT industry, my job is to encourage-individual initiative and the ‘creative cacophony’ that produces innovation, while ensuring that we work toward common goals and objectives. It’s a balancing act predicated on a consensus that the customer must be at the center of everything we do.
“Back in 2000, just before the really large potholes started to appear in the IT landscape, we decided that a change in course was necessary. We completely transformed our business model, a decision that incurred considerable risk and generated significant controversy. We reworked everything in order to give our customers a simpler, more flexible, and more cost-effective way to use and license our software.
“With our FlexSelect model, we let them decide how much, for how long, and on what basis they would like to license our products. Under this new approach, we’ve strived to reduce the term of contracts from an average length of five to six years in 2000, to three years or less today. Customers like this change because history has taught them a lot about how rapidly software technology changes. They appreciate the flexibility to move on, without penalty, to something more suited to their needs after only a couple of years.
“FlexSelect also helps eliminate the wrenching end-of-quarter purchase and discounting decisions that characterize much of the unproductive give and take between vendors and customers in the software business.
“The flexibility of FlexSelect even extends to how we get paid. For instance, a mobile phone company that licenses our software to manage its infrastructure pays us based on the number of subscribers. A European airline pays us based on passenger kilometers flown.
“In each case, payment is based on a metric that measures business success. Our FlexSelect licensing enables us to tailor our solutions to our customers’ needs.
“At its core, the new FlexSelect business model moves away from a traditional method of recording almost all of our license revenue upfront, to a method that records license revenue over the term of the agreement. Instituting this model required our people to completely rethink the way Computer Associates—indeed, every company in our industry—had been doing business for decades.
“Changing the traditional software licensing model required an intensive internal consensus-building effort around the idea that our company’s future would depend on the quality of our relationships with customers as much as it does on the quality of our technology. That was the easy part, because our own people had little difficulty in recognizing economic forces that demanded such a shift—and the benefits it would generate for our customers and our company. However, I would say that we underestimated how much difficulty some members of the investment community would have in understanding the rationale behind the move.
“That said, three years later, we are proud of the fact that our business model has given us a significant competitive advantage, particularly in today’s challenging economic environment. What’s more, we are starting to see other large software companies move toward our model. “I believe to a large extent becoming a good leader starts with surrounding yourself with people who are smarter than you. We try to teach our management team that they can’t and shouldn’t do everything themselves—that is, gathering all required information, performing all of the detailed analysis, and making all the decisions. Leaders must be able to delegate and rely on the good people supporting them, and they must learn to trust others. Leaders also must be extremely good listeners.
“But when it comes time to make a decision, leaders must step up and make a judgment given the best input they have. And then it’s time to move on to the next item on the agenda.”