Serena's IT Change Governance Vision

Commenting on the news in last month's CBR that the average tenure of a technology company CEO is now only three years, Serena Software's CEO Mark Woodward proudly notes that, "I've already managed double that, and I'm still here."

Not only has Woodward outlasted many of his peers, but since taking the reins in 1998 he has helped the company carve out a leadership position in what was a relatively neglected discipline, and grown annual sales to over $200m through a combination of organic growth and wily acquisitions.

Serena is not the only company attacking the change management software market. In fact it faces stiff competition from IBM Rational, Mercury Interactive, Telelogic, Borland, MKS and many more. But with an acute focus on change management and consistently effective execution, it has grown into a rather neat $200m company with a seemingly loyal customer base.

In recent years Serena has extended its reach beyond change management into other disciplines within application lifecycle management (ALM) with some success. To its ChangeMan change management and TeamTrack process and issue management products that add process to application development projects, it added the acquired Requirements & Traceability Management (RTM) product, a tool that enables the tracking and management of requirements throughout a project's lifecycle.

Add to those core products a web content management and collaboration tool, an application visualisation and prototyping product, and a mainframe development management and testing product, and the company's portfolio of ALM products is almost complete. So far it has managed at least some integration of those disparate products - disparate because several came via acquisition - thanks to its Serena Application Framework for Enterprises (SAFE) scheme that it says enables its products to work in tandem.

But Woodward has now seen another opportunity. Last month at its annual user conference in Washington DC, the company unveiled that vision for the first time. It is calling it IT Change Governance, a term it is sufficiently proud of to have trademarked it.

According to Woodward, it is in the area of change management where software can really help a company with its governance processes. Yet he is critical of the IT Governance visions held in high esteem by the likes of Mercury Interactive, Computer Associates and Compuware, saying: "I don't know what IT Governance is or what it does."

Arguing that the combination of its process management, requirements management and change management software tools can help a company with its various compliance challenges, Woodward reserves particular scorn for IT Governance proponent Mercury Interactive: "I don't believe Mercury has anything to do with governance at all," he says. "They do testing and planning for application development. If you look at Sarbanes 404 regulations, two out of four of the tenets are about version control and change management. There's nothing in there about application planning and testing."

Competitive disagreement

Mercury is quick to refute that assertion, however. Mercury's Roger Gilheany, IT Governance director UK, says: "Woodward needs to go and talk to the 300 customers who are using our software to address their governance challenges."

"We already do all of the change management that Serena offers," Gilheany adds. "But what we do that Serena doesn't do is give the CIO the tools needed to measure and monitor the value being delivered to the business by IT: that's IT Governance."

Meanwhile, the first evidence of Serena's IT Change Governance vision was its conference announcement that it is creating a new ecosystem of partners to provide domain expertise in specific areas across the compliance spectrum. The company says the program is designed to help customers minimise the time and cost of achieving compliance - including Sarbanes-Oxley, HIPAA and others - by coupling Serena technology with industry best practices to automate and streamline the compliance process. Change Dynamics, a company specialising in Sarbanes-Oxley (SOX) compliance, is among the first to join Serena's Authorized Compliance Partner Program.

Serena is also planning tighter integration between its various change management products, something its competitors argue is long overdue. David Martin, MKS VP of product management, says that Serena's portfolio consists of, "At best loosely coupled integrations and at worst, wildly overlapping feature sets."

Integration issues

Martin describes the recent news from Serena that it has already integrated its Requirements and Traceability Management product (RTM) into both its change management and process and issue management products as: "Integrating an acquired, over-featured and heavy-weight requirements management tool into the virtual army of administratively-heavy, acquired software configuration management (SCM) tools that Serena possesses."

MKS claims that its own ALM portfolio is more tightly integrated because it has built it in-house rather than through acquisition.

But Serena's Woodward dismisses MKS's observations as "primarily competitive bickering from a company a fraction of our size." He adds that, "We do agree that integration is better, but today we have fantastic integration already."

Nevertheless, tighter integration is planned. In May 2006 Serena plans to launch a new, more tightly integrated version of its acquired Merant Dimensions change management suite. The new version of Dimensions will be, "a single product with a single install, database, data model and so on."

But Serena will have even more integration work to do in the near future, as Woodward confirmed that it is on the verge of at least two more acquisitions. "We have a couple in the pipeline, likely to happen this year," he says. "We're probably looking at $20m to $30m acquisitions, what you might call 'tuck-in' acquisitions. In fact, there are four or five companies that we think are particularly interesting right now."

Serena is no stranger to acquisitions, its most notable being the $380m acquisition of Merant in March 2004, followed in June that year by the acquisition of the Requirements and Traceability Management product from Integrated Chipware. With cash and equivalents of $88.3m in the bank as of its latest quarter, and a market capitalisation on Nasdaq of nigh on $800m, Serena has the leverage to keep acquiring.

While Woodward would not say in which areas the acquisitions are likely to be, they will probably be companies that have strength in ALM, or fit into the company's IT Change Governance vision.

But did it really make sense for Serena to trademark the term IT Change Governance? As in the case of StorageTek opting not to enforce its trademark of the term Information Lifecycle Management (ILM) when it was used by EMC and others, it is sometimes better to hope broader publicity for a concept floats all the boats in the sector.

Woodward concedes that it may not be in the company's best interests to enforce the trademark if other companies wish to use it to describe their own strategies or portfolios. "We were very surprised to be able to trademark the term [IT Change Governance]," he says. "We have not decided whether we will enforce the trademark or not. On the one hand, we would like to see others use it and for the term to grow in relevance."

According to Woodward, the term IT Change Governance tested very highly in focus groups where it scored almost twice as much recognition as 'change management', which along with 'enterprise change management' has been Serena's rallying cry for the last few years.

But as with any public company there is also the question of whether Serena might make an attractive takeover proposition itself. It is growing, profitable, influential in its space and has a good customer base. Is change management, indeed is IT Change Governance, a big enough niche to support standalone vendors, or is it likely to be absorbed into broader ALM suites from the likes of IBM, Compuware, Computer Associates, Sun, BEA or Microsoft?

"That is the big question," admits Woodward. "Although we have become three to five times larger going from change management to ALM, it is true that customers want to buy from a smaller number of vendors. I am surprised [consolidation] has not happened already where larger vendors say they want it to be part of their portfolio. But we've not had that kind of dialogue yet."

CBR Opinion

Thus far Woodward has run a tight ship, and the company has been influential in helping to promote the benefits of change management in bringing discipline and process to application development and deployment projects. Analysts say the company's IT Change Governance vision has resonance in the market, and it should help the company find a wider audience for its products. It obviously plans to continue acquiring as it fleshes out that vision, but one cannot help thinking that Serena is becoming ever more attractive as a takeover proposition itself.