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CEO Spotlight: Bob Beauchamp, BMC Software, Inc.

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

BMC Software has without question emerged as one of the ‘superpowers’ of the enterprise software world: a company that every CIO either buys from, or will in the near future. Angel Mehta, Managing Director of Sterling-Hoffman, chats with BMC’s grown-from-within CEO Bob Beauchamp about adopting an ‘ERP vision’ for the IT department, re-teaching his sales force to sell technology (instead of financial products), and the most important list he’s ever created.

Angel Mehta: How did you get into the software business?

Bob Beauchamp: By accident. The economy in Houston was the worst of any major metropolitan city in the US at the time… the oil industry had just collapsed when I graduated, and unemployment rates were at like 14%... I couldn’t get a job. So I had to take a boiler-room telesales job selling Houston Rocket season tickets over the phone. They had just lost Moses Malone, were the worst team in the NBA, and here I was calling 300 people a day… nobody sold a single ticket for 3 straight months, which was a nightmare because I was on straight commission.

Then one day I tried to sell to a Sales Manager who ended up hiring me to sell computers. This was before Microsoft’s time… I was selling word processors door to door… got thrown out of a lot of office buildings… used to walk in with my computer on a trolley, and get escorted out by security. [Laughing] Then I ended up joining BMC, which was a small software company in Sugar Land, Texas.

Angel Mehta: You’ve been there for almost 20 years now?

Bob Beauchamp: Eighteen and a half, yes.

Angel Mehta: Was it clear that BMC was going to be successful when you first joined?

Bob Beauchamp: I think so, yes. I wasn’t there when the founder was financing the company on his credit cards… by the time I joined the company, they were already in explosive growth mode… 40% or more top-line growth, purely on inside sales. We were selling innovative, high-performance products over the phone. For every product we sold, IBM had a product that could do the same thing for free… and yet here we were, charging millions of dollars for our technology.

Angel Mehta: What was the first severe problem you remember the company encountering?

Bob Beauchamp: One of the first was when the industry fell in love with selling capacity contracts. It was in the mid ’90s, and customers were adding more servers and capacity at an incredible rate… and of course, our contracts were based on computing capacity – everyone was doing it that way. So every time the customer would upgrade or add more servers or mainframes, they would owe us more money. So of course, we all developed this concept of selling customers future capacity at a big discount. If the customer expected to double their computing capacity in the next 2 years, we would offer them triple capacity in 4 years and offer a big discount. The problem here is that on one hand we were selling technology to technical buyers, but on the other we were selling discounts to purchasing departments or financial people. Our sales people could make a lot of money without knowing anything about our products – they simply had to understand discount cash flow analysis, internal rates of return, etc.

We were cultivating a sales force of bond sales people, which ended up dumbing down a lot of great sales executives and taking them to the point where they lost touch with the IT needs of a customer. It’s dangerous for a technology company to get bogged down talking to the purchasing department about numbers, instead of talking to the business person or technology person about how we can add value to the company.

Angel Mehta:
So what happened when the bubble popped?

Bob Beauchamp: You know what happened. The bottom fell out, revenues crashed from $1.8 billion to $1.2 billion in less than 2 years. I became CEO right around this time… I remember giving this speech to our staff about the ‘Watertight Ship’ and how we’re in a storm, and if we don’t batten down the hatches, our ship is going to sink. The point was we just have to live to fight another day. The employees rallied around it… we were able to get our expenses down, etc.

Angel Mehta: Was it difficult to get back on the path to growth after a period like that?

Bob Beauchamp: Not really – because people are dying for it. We went out and built a roadmap for the future based on our current assets. We knew we were going to be a software company in the systems management space… and we had this idea that the industry was evolving from point products to suites, sort of like what happened in ERP – I use that metaphor a lot.

SAP invented almost nothing, from a business function standpoint. What they invented or perfected along with Oracle was an integrated enterprise deployment of those business functions and I believed that the same thing needed to happen in our space. I had a meeting with a customer once… probably in 2001 or 2002… that really, really drove it home. It was the CIO of the fourth largest bank in the world, and he said to me: “We have two database vendors, two server vendors, two network vendors, two storage vendors, and 52 management tool vendors, and none of you can tell me how my customers are doing. You all just sell point products designed to let my people say it’s not my fault.” It was a powerful message and helped us understand how screwed up the industry was.

Angel Mehta: What is the biggest misconception that parties have about BMC from a customer standpoint, from an investor standpoint, and from a market analyst standpoint?

Bob Beauchamp: I think the biggest misperception is that we are primarily a mainframe tools company. Today our true mainframe revenues are only about one-third of our revenue and not many years ago it was 90%. I’ll give you an example. Two weeks ago, I had one of the top executives from one of the world’s most famous overnight package logistics companies… he was at our office with his entire senior staff. We gave him a presentation and at the end, he said, “This blows me away because I had no idea what you were up to. This strategy is exactly where I want to take our company.”

The same thing happened with the CIO of a major insurance company up in the Northeast… I had lunch with him and he basically said that 2 years ago his entire staff viewed BMC as one of their top vendors, but primarily a mainframe tools company. “Not strategic,” his people were saying. But fast forward to the present, and he said his people have completely shifted their perspective. After his people visited the briefing center to get an overview of the REAL BMC, they are telling him, “BMC is the most strategic vendor we have.”

The problem is, not every customer has been to the briefing center. Not every customer has a top, world-class sales team and a support team from BMC assigned to them, so they may not have heard this story. Because we advertise very little, our marketing has not done much of anything in terms of changing those perceptions. We’ve had to rely on brute force sales in our briefing centers – getting the customers in here, word-of-mouth, and customer events… steadily, the perception is changing.

Angel Mehta: What tactical advice would you offer to the CEO of a smaller software company who’s trying to fight BMC in the trenches?

Bob Beauchamp: Well, my answer is not just for smaller companies because it becomes harder as you get bigger. We’ve done many acquisitions through the year and I’ve personally been involved in the due diligence of at least 100 companies over the years… I can tell you that one of the things that separates a great small company from a failing small company is very tight, very precise sales methodology. From demand generation, through demonstration, through ROI-building, through closing the sale… the closer you can get that to a machine, to an assembly-line model, the better. The more hand-holding, customized, ‘what do you want, let’s work through that, maybe engineering can build that for you’ type of approach you have, the harder it is to succeed. I’ve seen companies with great technologies fail because they have weak sales execution and I’ve seen companies with bad technologies be successful because of great sales execution. So I think long-term you’re not going to be successful without good products but you will not be successful without good sales execution.

The small company’s advantage is that it doesn’t have a lot of products, and so if their sales people have nothing to sell but one or two products, there’s no excuse for them to not be extremely well versed in how to sell those in the competitive environment. When you get to be a larger company like BMC that has hundreds of products, it becomes more difficult for our sales people to be as precise with the sales process… to be as tight and as repeated. There’s more relationship selling, more strategy selling, more process selling, more services in how it’s going to be implemented. It makes the deals large, it makes the commitment more strategic, but it’s not as efficient as a small company. On the other hand, unless a small company has incredible technology and is going after a giant market, they have no chance of going far before they’re going to need to be acquired.

Angel Mehta: Speaking of sales execution… did you ever find an entitlement culture forming through the bubble, within the sales team? How did you do away with that after the bubble burst?

Bob Beauchamp: Oh, absolutely. We had a huge entitlement culture. Our whole industry had that. The attitude was, “We’re just smarter than everybody, we’re software people, we get it and you don’t.” That arrogance blew up in our faces and I was the victim of it as everyone else was. But luckily, crashing into the ground brings humility. That certainly helped us deal with the problem. But the other thing we had to do to fix it was, fire a bunch of people. You have to fire the people that aren’t ready to change. There were people at BMC who believed that nothing’s changed and that everything should be the way it was in 1999. I wish it were that way too. That was a lot of fun having customers who didn’t know the sales executive’s name fax you orders because they had to upgrade, but that’s just not realistic over time. We had to re-tool and really focus on adding more value to our customers. There were employees who worked here who hate BMC to this day because they feel like they were somehow robbed of a lifetime of easy living. They thought it was supposed to be easy.

Angel Mehta: I’ve been asking this question to a number of CEOs recently… what do the best software sales people know and understand that the average or mediocre sales people do not?

Bob Beauchamp: Well, software is not unique, in my mind. The great sales executives are the same across every industry: They’re good listeners, they believe in their product, and they think that if the customer doesn’t buy it the customer is making a mistake and they’re willing to fight the customer on that decision. They feel like they owe it to the customer to not let the customer make a bad decision and they come at it with that attitude. What I like to say to our sales classes is that you work for BMC 51% and you work for your customers 49%. The difference between that 2% is that you can’t work here if you lose sight of the fact that you work for us, but they should fight for the customer. Every now and then a company like BMC will mess up and do something wrong and get the customer into a jam or we’re not doing as good a job as we should… the salesperson’s job is to fight for that customer and to not allow BMC to do something that’s going to hurt the customer.

Angel Mehta: If you could snap your fingers and instantly instill one behavior or habit into each of the sales people at BMC today, what would it be?

Bob Beauchamp: Work ethic, just working hard. It’s really about persevering and working hard all day long.

Angel Mehta: Could you have become CEO of BMC had you stayed in the sales function?

Bob Beauchamp: No. I needed and really appreciate my bosses before me who gave me the opportunity to try other things. Managing R&D is the hardest job I ever had and I think it’s harder than this job and I did that for five years. It’s not my natural skill set… I would never hire myself as Head of Engineering. I basically leaned on the people who worked for me at that time. But the point is if you don’t understand the R&D organization and the product management organization, you can’t run a software company.

Angel Mehta: What’s the greatest length you’ve ever gone to in order to hire someone you really wanted?

Bob Beauchamp: I keep a list of people that I hope will some day come work for us. I started keeping the list 10 years ago, and one of the guys on that list was a Manager at HP in the software division. I met him years ago when we were negotiating an alliance, an OEM agreement with HP, and even though there were a dozen HP people there, he was the one guy who stood out. After we acquired Remedy, we needed someone to run the new group, and so I called him up. He was running HP Openview at the time, much larger than the group I had for him… but what intrigued him was the chance to change the industry by putting the service desk together with systems management tools. I told him that’s exactly what we’re trying to do, so just come take a look at what we have.

To your question, it was one of the hardest sales jobs I ever did. We had to get him to give up one of the best jobs in the software industry and come work for us on something new. It was trying to show him every aspect of the vision, the benefits of working for a real software company, not a software division of a hardware company, etc. It was tough, but we got him.

Robert (Bob) Beauchamp is President and CEO of BMC Software. Since joining BMC in 1988, he has risen quickly through the organization, serving in positions in research and development, strategic marketing, and corporate development before becoming CEO in 2001. Throughout his career at BMC, Bob has been the driving force behind BMC becoming a customer-centric organization, leading its evolution to a major player in enterprise management. He spearheaded the company’s transition from point product to solution selling by setting the vision in 2003 for Business Service Management (BSM). For interview feedback, contact Bob at: bob_beauchamp@bmc.com

Angel Mehta is Managing Director of Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies and lead investor in http://www.softwaresalesjobs.com, the #1 site for software sales jobs. Angel can be reached for feedback at amehta@sterlinghoffman.net

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