Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | ContactBookmark The Sterling Report


Will the enterprise market spend significant IT budget on Windows Vista in 2007?



CEO Spotlight: Mark Woodward, Serena Software, Inc.

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

Through a series of acquisitions, Serena Software has grown from obscurity into a multi-hundred million-dollar infrastructure software market leader. Angel Mehta, Managing Director at Sterling-Hoffman, chats with Serena CEO Mark Woodward about what he learned about investing in sales from Siebel, and the dangers of falling in love with a deal.

Angel Mehta: Serena seems to have morphed quite a bit since you arrived… what have the most significant changes been?

Mark Woodward: Quite a bit. When I first came here, 6-½ years ago, we were basically a ‘mainframe tools provider’. We were doing $40-$50 million a year in revenue and had a few tools that were focused just around managing mainframe applications. Today, through a number of acquisitions, we are almost a $300 million dollar revenue company. We’ve gone from a very specific mainframe focus to a much broader focus around enterprise change, configuration management and different process controls. We help companies effectively manage change throughout IT by reporting on, and providing tracability into all of the different changes that occur during the software development process.

Angel Mehta: What were the drivers that existed to even motivate that kind of strategic change in the first place?

Mark Woodward: It was clear that the company needed to create a solution that would address a much broader need and extend beyond mainframe technology. We decided to come up with a differentiated offering, coined ‘enterprise change management’, which basically means helping companies manage change over any application within any environment -- whether it’s a mainframe, UNIX or Windows or Linux application. As soon as I became President and CEO, we began to move fairly aggressively in terms of our development, messaging and entire corporate strategy. This led to many of the acquisitions and how the company grew to be an enterprise provider.

Angel Mehta: Very few software companies that attempt a reinvention actually succeed at doing so – particularly via the M&A route. In fact, M&A as a strategy seems to fail much more often than not. Why did it work for Serena?

Mark Woodward: One lesson that can’t be understated is to have a clear strategy and then stick with it. When you get into a situation where you’re doing a lot of acquisitions – as we have -- you need to have a very specific methodology for doing them. You also need to have a thorough understanding of you’re objectives for the acquisition, and to do very deep due diligence in the company. One mistake many people make is falling in love with the deal, and as they start turning over rocks and finding problems, they find reasons to rationalize why it’s okay. As you go through due diligence, if you find things of concern, you need to pay a lot of attention to those and go back to the reason you’re doing this deal. In fact, if you’re finding things that are troublesome, you need to have the guts to pull the ripcord and get out. We’ve done that twice where we’ve been pretty far along with an acquisition and pulled out because we found issues or things that were concerning to us. I think many companies either don’t do deep due diligence or they find reasons why to do the deal anyway.

The second lesson is: don’t overpay, stick to your guns and remember what it was that you valued this company at, and focus very intently on the actual integration of the company. I think this is probably the area that most deals fall down. Many people pay a lot of attention to the due diligence until they decide to do the transaction, and then they save the integration part of the equation until after the acquisition is closed. You’ve now assumed this company and that’s an enormous mistake because it takes months to do that planning work. In my opinion, I think the reason we’ve been successful is that we’ve always been ready to pull the trigger on the integration the day the deal closes, instead of just starting the process. We start the process when an agreement on the deal is reached because it is essential to go in and understand early on what the combined company is going to look like. When we’ve done smaller acquisitions, it’s been fairly easy to incorporate the acquired companies into our existing infrastructure.

Angel Mehta: Can you give me an example?

Mark Woodward: A year ago, we acquired a bigger company with a completely different infrastructure, and we needed to figure out how we were going to bring the two companies together. We obviously knew that we didn’t have the infrastructure or the organizational structure to just plug them into our company. We needed to go in and create a completely new organizational structure. For each department, we created ‘transition teams’. We identified sixteen different functional areas, manned those with five to six people from both companies, and had those ‘transition teams’ plan what their functional area would look like in the combination. Those recommendations were passed on to the Executive Committee to make the final decisions. We not only did this transition planning early on, but also involved individuals from both companies so that when we pulled the trigger and made the changes, there was complete ownership on both sides in terms of what this new combined entity would look like. So doing deep due diligence, not overpaying, and doing transition planning rapidly, early on are the lessons, I believe, will make acquisitions successful.

Angel Mehta: Most of the time an acquisition is followed by layoffs as redundancies are eliminated….this is typically the toughest part of a CEO’s job. What advice do you have for other CEO’s that may be about to set out on this kind of strategy?

Mark Woodward: If you’ve talked to people who have done deals over and over again, probably the most common advice you would get from all of them is: ‘don’t be afraid to cut deeper than you think you need to -- because ‘you can always come back and hire people back again’. If you don’t go deep enough the first time, you really lose the hearts and minds of your employees because they go into this panic mode thinking ‘Oh! My God! Here we go into this recurring layoff mode; when is it ever going to stop?’ So if you need do it more than once you really lose the trust and loyalty of your employees. On the other hand, if you communicate with them that it’s only going to happen once and you live up to your word, they will remain loyal because you did what you said you were going to do.

Angel Mehta: How is Serena perceived especially after your most recent acquisition of Merant? Do you think the marketplace really understands where Serena is positioned today?

Mark Woodward: No, our story is definitely much bigger than most people perceive it to be. We realized we’ve been too inwardly focused, so we’ve brought in a new marketing executive to help people understand our position in the marketplace today.

Let me explain: Merant and Serena were both focused in a similar marketplace with very different solutions within those particular spaces; Serena was mainframe-focused and Merant was non-mainframe-focused. By pulling these technologies together, we’ve created some solutions that have never been available in the market before. We have the highest name recognition today in the mainframe change management space, but the company is SO much more than that because the offerings we have go far beyond just managing application change today. In terms of revenue, we have grown from a $50 million company to nearly $300 million. We are repositioning and re-messaging the company around managing change within IT. It’s not just about managing an application, Web or infrastructure change; it’s about managing any kind of change and the tools around helping companies standardize on common processes throughout the enterprise. Companies can now have a single process for how they manage changes regardless of whether they’re from mainframe, UNIX, NT or Web content.


  Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | Contact | Terms of Agreement
© 2006 The Sterling Report. All rights reserved.