Figure 1. Traditional Business supply-chain mixed with direct sale to customers
All operations involve taking inputs (raw materials, human resources, etc) and transforming them using technology, processes and rules, into consumable outputs (i.e. finished products or services). However they do differ in four types of dimensions (Slack at al. 2001, p. 21):
The Volume of CA’s output is high. It serves organisations in more than 100 countries, including 95% of Fortune 500 companies. The development process is in continuous change and improvement. Software products are bundled according to versions and licensed and sold in high volumes according to the current version of each product.
The Variety of CA’s output is high. CA’s strategy is known has “3 x 6”. The company’s more than 1000 different software products are grouped into 3 strategic categories: Information Management, Infrastructure Management, and Business Process Management. Across these 3 different categories, CA delivers solutions in 6 different core focus areas: Application Life Cycle Management, Data Management and Application Development, Enterprise Management, Portal and Business Intelligence, Security, and Storage. CA adopted recently a new innovative business model offering totally flexible customer licensing, including traditional up-front, month-to-month and over-a-term licensing payments. Customers can now choose what best suits them and do not have to pay out large lump sums up-front. They are not buying and then later having to part-exchange or sell, instead, customers are well aware of their current cashflow position and in an ideal position to budget accordingly. Industry analysts started calling this “pay as you go software”.
The Variation in the demand of CA’s output is high. There are good quarters and bad quarters. However, the company does not change its capacity over periods of low demand so costs remain the same. Internally, support, services and sales staff are encouraged to take holidays during the period where demand is low, typically, during the Christmas and New Year, summer holidays and near or just before the end of the fiscal year where software customers do not usually buy anything.
The degree of Visibility which CA’s customers have of the production (also known as the degree of customer contact) is high. CA believes that the software market demands good customer service and good customer relations in order to gain customer satisfaction and competitive advantage. The company created a Customer Relations Organisation (CRO) - a non-quota carrying group of service professionals, completely separate from the sales reporting structure, with a single mission: to make sure CA does the right thing for customers. Each Customer Relations Manager (CRM) is responsible to make it easy for customers to navigate through all of CA’s functional areas, providing a single point of contact within CA – “a human CA browser” (O’Connel, 2001). This helps customers to gain maximum value from CA’s manufactured products and keeps CA in close contact with customers. Internally, the company introduced five well-defined core values, the first being: putting customers first in everything you do. The idea was to make sure employees were focused in everything they do.
Figure 2. Computer Associates’ Five Core Values introduced in 2000
Section 2. An identification and evaluation of the major strengths and weaknesses of the Operations Function in Computer Associates.
According to Slack at al. (2001), the Operations Function can provide competitive advantage through its performance at five competitive objectives depicted in Figure 2.
Figure 3. Five Performance Objectives adapted from Slack at al. (2001, p.57)
Over the past four years, CA has developed a comprehensive and consistent view of the IT market place and went through several internal reorganisations to align its business more closely with the interests of customers.
One of the main strengths of the company is the fact that it is still at time of writing the only global enterprise software company with ISO 9002 worldwide certification (acquired in 2000). This is certainly an order winner for many customers since there are no other competitors offering the same worldwide qualification. CA’s Quality policy is visible to customers so that customers can judge quality standards for themselves. Externally, it means satisfying customers by providing error-free goods and services which are fit for their purpose. Internally, quality provides stability and efficiency and is all about doing the correct things for customers. It reduces cost and increases dependability (Slack at al. 2001). ISO 9002 worldwide certification addressed and fixed past internal problems of poor quality discipline and less incentive to cooperate in quality improvements, from in-house suppliers, characteristics of a vertically integrated company like CA (Slack at al. 2001, p. 158).
CA wants to do things on time, so as to keep the delivery promises. This applies to new product version releases and also potential fixes to specific software faults (usually known as software bugs).
Most new product versions are released according to the project’s specified deadlines. When a customer logs a bug fix request, CA immediately prioritises the importance of the bug fix according to customer needs and depending if it is a “show-stopper” or if there is a work around the bug that will allow the customer continue working. Bug fixes are then worked according to the priority given and respective expected fix date. Unfortunately, due to the large diversity of problems, customers’ environments and lack of CA’s internal resources, it is not always possible to deliver a fix in the initial specified estimated fix date. Dependability fosters trust and stability and saves time and money. CA’s upstream vertical integration provides better dependability performance in the sense that in-house suppliers are able to anticipate delivery problems and those can then easily be transmitted to customers at an early stage before or immediately after the order has taken place.
Speed is one of CA’s strengths and order qualifiers. Speed is important to CA because the faster the customer can be provided with the goods or service; the more likely they are to make the purchase. CA’s products are largely available from the main software retailers and can be also purchased directly from CA sales force. In the software industry, what takes longer is the development process of the product. Once a product version is ready and released for the first time, it takes next to no time to produce stocks ready to sell. All CA needs is to burn the CDs and package the product ready to sell. Speed is relevant because supply-chains benefit from reducing flow time, lowering lead-time and lowering work-in-process inventory levels, and, consequently, reducing risks associated with inventories.
In terms of flexibility, CA has got strong product and services flexibility. The fast technologic advance in terms of both hardware and software forces CA to be in constant change and update, by introducing new products and services according to market demands and by adapting current projects to the changes of the surround technologies. It also has strong mix flexibility by being able to stock and provide a large range of products and services. However, CA is heavily committed to its more than 1000 different products and it cannot concentrate properly on key products where it is clearly easier to achieve better success and better profits. This, in my view, is a weakness which needs to be addressed. CA’s volume flexibility (the ability to change level of output and the need to cope with ‘variation’) and delivery flexibility (the ability of the operation to delay or bring forward delivery dates) are both low as a result of CA’s huge range of products. It is difficult to concentrate on particular and specific products that require immediate attention.
Flexibility speeds up response, saves time and maintains dependability. The ownership of some suppliers provide the potential to dictate volume and delivery flexibility (Slack at al. 2001, p. 158)
CA’s new business model (‘pay as you go software’) described in section 1, provides high flexibility to customers by allowing them to choose the type of scheme best suited to them. This can be seen as an order winner as well because very few software manufactures (if not CA alone) offer this option. No longer are customers required to pay a lump-sum upfront. Now they can vary their software mix according to their business needs and change their orders according to the growth of their business.
Last but definitely not least in a highly competitive market, the need to be cost effective is CA’s major operations’ objective. All types of costs associated with a specific CA product are directly linked with the market demand and sales forecast of that product. If demand drops for a certain product, CA automatically adjusts that product’s resources (raw materials, human resources, etc). In house suppliers (from an upstream vertically oriented operation) allow sharing of costs and balanced capacity utilization as well as a share in the potential profits when supplier margins are high (Slack at al. 2001, p. 159). Cost can be reduced by improving performance of the other four operations objectives, i.e. cost is affected by the other performance objectives (Slack at al. 2001, p. 56).
Section 3. An analysis of the extent to which the operations function supports the broader Business Strategy of the organisation.
CA’s business strategy is: to develop leading technology, to acquire it where it makes sense and to integrate that technology fully in order to become the world’s leading eBusiness Software Company.
Since 1976, from a team of 4 people, one product and no venture capital, CA has grown tremendously to a worldwide organisation of 16,000 employees and more than 1000 different products, mostly acquired through company acquisitions.
Figure 4. The Role and Contribution of the Operations Function,
Hayes and Wheelwright (1984), adapted from Slack at al. (2001, p. 43)
Today, CA believes eBusiness touches every aspect of the enterprise – connecting with customers, suppliers and partners around the globe. eBusiness management has become a critical discipline for every organisation around the world. With the most advanced and comprehensive eBusiness portfolio available in the market, CA has uniquely positioned itself to help companies succeed in this new era that demands great speed, innovation and accuracy. Following the ‘Four Stage Model’ (Hayes and Wheelwright, 1984), CA is at stage 3 at the moment because most current operations are appropriate for long-term strategy and the company is seen as the best in the industry for their portfolio of products.
The new business model ‘pay as you go software’, the ISO 9002 worldwide quality certification and the Customer Relations Organisation are all ideas that are working well and are all order winners. Customer satisfaction surveys have proved these facts. However, in my opinion, CA offers a very large range of products (more than 1000) and many of those are overlapping in what they offer. It becomes very difficult to concentrate on specific products that are superior by design and by their specific features but fail to get the promotion they deserve in order to truly succeed in the market. Some CA operations managers understand this problem but nobody really wants to make the decision of cutting overlapping products. This has to do mainly with taking the risks of upsetting and losing the customer base of those products (excess of concern about customers’ needs!).
A detailed independently managed analysis of the products CA offers would certainly conclude that many products are indeed overlapping in what they offer. Decisions to retire those products (keeping to maintenance phase only, for a period of time) would not only decrease costs but also allow the company to concentrate in the most important non-overlapping products, increasing market competitiveness in those products and general dependability, flexibility and speed.
Also, there is lack of business integration from some of the acquired companies that until today are operating as autonomous units. These are a minority of CA’s operations but needs to be addressed.
Section 4. Recommendations for improving the operations function, whilst leaving the broader business policy unchanged.
-
CA has grown predominantly by acquisitions. Many of the acquired companies have been fully integrated into the giant CA is today. But few have remained as autonomous operating units. These have also maintained their legacy software business applications (the foundation upon which they still run their business). The lack of integration of these business applications prevents CA from taking maximum advantage because they contribute for the existence of multiple copies of master data such as supplier, inventory data and customer. Operations based in these non-integrated business applications cannot be efficient because there is no sharing of information. For example, how does CA know if they are shipping from the closest warehouse to the customer? Unless these few business applications are fully integrated and have a common interface, it is impossible to guarantee such thing. So, when it was mentioned CA’s speed output is high (in section 2), the lack of integration problem was not taken into consideration. Non-fully integrated acquired companies have to integrate as soon as possible in order to improve speed output. Continuing with the current situation is a waste of potential opportunities.
-
Is there a relationship between size and strategy? CA has become a huge company and is growing more and more, day by day. However, research has shown size does not mean growth. The survival rate of big companies is higher than small companies. But is it not also true that the bigger the company becomes the slower it grows? So, how will CA find out where to stop? Keith H. Hammonds (2000) argues that depending on the marketplace, big is better but only up to a certain point. The turning point can be obtained by detailed analysis of the transaction data, business intelligence and market research. CA might need to sell some of its operations units in order to keep its current growth rate.
-
The software manufacturing sector can easily be subjected to a strategy of quality improvements through the use of JIT and Lean Management principles in order to reduce quality related costs (Chase at al. 2001, pp 268-270). The first step should be to change how employees think. CA needs to introduce lean thinking. The ISO 9002 certification is already making sure every activity is well structured and documented. It is equally important to simplify work flow. Over the past two decades, many companies were acquired by CA and flows got convoluted and complicated. CA’s number of employees increased exponentially. Work flow needs to be as simple as possible. Managers should be the suppliers of know-how at all times but they should allow their employees to experiment as well in order to learn for themselves. Managers need to connect with their employees properly and efficiently. Business performance success of some of CA’s operations units can be enhanced by the use of JIT (Just-in-time). JIT will make sure that inventory is produced only when a known customer is waiting. This pulls the inventory through the system and avoids wasteful time and money in managing inventory. In other words, develop a strategy of build-to-order to eliminate wasted labour time waiting for inventory that should have been available, wasted capital in inventory that customers did not ask for, wasted motion in material handling that is not necessary, etc. This strategy also calls for virtual integration (Rollins 1998) which means piecing together a business with customers and suppliers and treating them as if they are part of your organisation.
-
Chase at al. (2001, pp 271-273) suggests a procedure for benchmarking that can be used to improve CA’s supply-chain performance. It includes the following steps:
- Establish a benchmarking team responsible for overseeing the benchmarking process. Team guided by supervisors and must contain employees from the same areas where process change will take place.
- Identify the processes requiring improvement.
-
Identify best performance process measures (usually from another company whose process performance is the best in the industry. Data can be obtained from or )
- Collect data on current operations and supply-chain activities and perform comparative analysis (again with an industry performance leader)
- Establish a set of recommended process changes – Long term and short term – and multiple strategies for their implementation
- Follow-up to insure successfulness. Performance measures that helped to identify operations problems should be posted where related personnel can see them. Management should then communicate the progress and the achievements and continue to offer suggestions and approaches to constant learning and improvement.
REFERENCES:
CHASE, R. B., AQUILANO, N. J., JACOBS, F. R., 2001,
Operations Management for Competitive Advantage. 9th ed.
Boston, MA: McGraw-Hill/Irwin
Computer Associates Website
http://www.ca.com
HAMMONDS, K. H., 2000, Ilustrations by Serge Bloch – Size is not a Strategy
Fast Company Issue, page 78.
Available from:
HAYES, R. H., and WHEELWRIGHT, S. C., 1984, Restoring our Competitive Edge
John Wiley.
Described in Slack (2001, p. 41)
JOHNSON, G. and SCHOLES, K., 2002, Exploring Corporate Strategy, 6th. ed.
Hemel Hempstead: Prentice Hall
O’CONNELL, V., 2001. CA Does the Right Thing; Customers Say CRO Rocks.
Impact, AberdeenGroup, November 8, 2001.
Available from:
ROLLINS, K. 1998,
The Power of Virtual Integration: An interview with DELL Computer’s Michael Dell
Harvard Business Review, Mar/Apr 1998, Vol 76, Issue 2, p72.
SLACK, N., CHAMBERS, S., JOHNSTON, R., 2001, Operations Management, 3rd. ed.
Italy: Prentice Hall
