FRAMINGHAM (11/26/2003) - It's been a year now since BMC Software Inc. in Houston officially acquired the Remedy business services management division from Peregrine Systems Inc., and since that time, the Remedy division has outperformed BMC's revenue and earnings expectations each quarter. That's made it one of the most successful acquisitions in the software industry, BMC officials boast. Jim Grant, general manager of the division, started working at Remedy in April and talked with Computerworld this week about the marketplace and where Remedy will go from here. Excerpts of that discussion follow:
How has Remedy's first year with BMC gone? Mergers are always a handful, but BMC's acquisition of Remedy was facilitated well. BMC's strategy was really reliant on bringing together the two different worlds of Remedy and BMC. It wasn't, 'Let's just grab another company.' We're selling into more enterprises and government and education organizations with a combined strategy.
Remedy is a well-known brand to the user base, because Remedy is the set of software that exists between the IT organization and the customer support organization.The space is IT service management.
Originally, there were up to 800 Remedy workers, and we're now up to 950, out of 6,000 in BMC overall. We make about one-fifth of all of BMC's revenues, and we're paying our bills. In the second quarter that closed Sept. 30, we were at US$60 million in revenues, compared with $334 for BMC. (In the first quarter, BMC revenue totaled $310 million, while Remedy was $54 million.) The second-quarter total operating margin was 35 percent.
In summary, we didn't see the slowdown that a merger normally causes. This merger sped things up, and there was not any overlap in products. We are both serving the common customer with common problems. It was a smart acquisition. I would challenge you to find one other acquisition that's done this well.
What are the key differences between Remedy and its competitors? Our key differentiators are the underlying technology that can run anywhere. It doesn't require code-level programming to readjust it. The underlying technology is what we call the Action Request System. Our competitors are (Hewlett-Packard Co.), (Computer Associates International Inc.) and, obviously, Peregrine, which has come out of bankruptcy. We're doing a fair amount of work for Peregrine customers, since the Peregrine relationships got a little stale in the months of bankruptcy. IBM (Corp.) is really more of our partner since we signed an agreement in September, and IBM is now beginning to push Remedy products. It is something of a mutual pull on the rope at the same time.
What needs are you hearing from customers? Our customer satisfaction is extremely high, and we're extremely high on renewals, since more than 90 percent renew. Remedy has been around 10 years and we're at Version 5.5, and we try to have one major release a year. The market for business service management is ascending. The idea of business service management is resonating into midtier accounts, very strongly so in Europe, and we're always resonated in the higher tier.
How do you think the overall economy for these kinds of IT products is doing? It's improving. I was recently on the East Coast talking to customers, and for the first time in a long time, I was asked how Remedy applications could help this customer improve its top-line revenue, as opposed to what you'd hear in the past about wanting cost containment.
This product improves customer service and the ability to drive assets in IT from the business perspective. You can begin to say that a business can have a need to program into our processes. It's making sure the IT division serves business purposes, so then we can talk about supporting revenue production.
What are the new technology directions Remedy will take in the coming months and years? We just released the Customer Service Support suite and are leveraging information going into internal management. We're looking hard at how people are using the Remedy action request system, both in service management and in general workflow in businesses out there. We're looking at business process management workflow technologies to solve integration.
In terms of managing Web services, we are building Web capabilities into the customer support suite. The whole idea of on-demand and autonomic computing still require that a business purpose be tied into the infrastructure.