We've already gotten used to the parade of high tech general managers visiting Israel, distributing smiles, dollars, and promises, massaging Israeli egos, and complimenting our wonderful technology and manpower. We are not, however, accustomed to men like BMC Software chairman, president, and CEO Max Watson Jr. Watson, who heads a $9.3 billion organization, and is as openly direct as the average Israeli. The jokes he tells are peppered with a light sprinkling of impudence and pride, just like an Israeli. A joint interview with Watson and with former New Dimension CEO Dan Barnea, who is currently serving as BMC Israel CEO, is an entertaining game of verbal ping-pong.
Watson doesn't want to make an effort to charm anyone, at least not with words. His only goal for being in Israel is money. If he invests in Israel, it is solely for BMC's benefit. He has no interest in being nice.
On the morning of Watson's arrival in Israel, a report appeared in the press that could have been construed to mean that he was landing with a suitcase containing $70 million in cash and planned to wander the streets until he found a company to invest in. That makes him laugh. "We announced the acquisition of OptiSystems only two weeks ago, and I don't intend to acquire another company next week."
BMC is one of the world's leading software companies, with a current market value of $9.3 billion. The share is at $38, but you know how it is: this share was at $85 at the beginning of the year, reflecting a value of over $20 billion for BMC.
"Globes": Was the fall painful?
Max Watson: "I hate it when the share goes down, but unfortunately I can't control it. I still strongly believe that the market will rise again and reach a still higher level. In the meanwhile, we are taking advantage of the opportunity to invest in the company and grant options to employees."
Very few people in Israel had heard of BMC before March 1999. That was when BMC made the biggest deal (up until that time) in the Israeli technology market, when it acquired New Dimension for $650 million. Watson visited Israel several months later to meet the employees and coordinate work plans with Barnea. He had to put a great deal of effort into calming New Dimension employees, who were afraid that BMC would grab the know-how and fire the employees. At the time, Watson not only promised no one would be fired, but that the number of employees would be doubled. He even committed himself to investments in the Israeli division and promised a rise in sales.
What is the purpose of your current visit to Israel?
"There are several aims. First of all, laying the cornerstone for the new offices in Ramat Hahayal and the development center in the north, what is the name of that settlement?"
Tel Hai.
"That's right. I came because we announced our acquisition of OptiSystems (for $70 million - K.T.), our second in Israel, a few weeks ago, and I haven't been here for a year, so I thought it was high time I came for another visit. My initial impression is that we've our achieved our goals. The last time I was here, we made promises and talked. A year and a half after the investment, I think we've proved our seriousness to the employees with deeds. We increased the number of employees by 50%, and we now have 470 employees in Israel, together with OptiSystems. After we move to the new building, we will recruit more employees, and BMC Israel will have 600 employees.
"We set targets, we created employment and tasks, we invested a great deal in the company in Israel, in computer infrastructures, and we doubled sales in our first year of ownership. I think the acquisition went well, to the benefit of both parties. Now we will consolidate the activity of BMC Israel with that of OptiSystems."
"The acquisition of OptiSystems is important for two reasons," Dan Barnea adds. "For New Dimension personnel, it is a proof that BMC is here for good, and for OptiSystems it will be easier, since it is following in the footsteps of its big brother, who made a successful transition."
What is BMC's expansion strategy? Acquisitions or R&D?
Watson: "Both. Israel, for example, is now part of BMC, and development activity in Israel is now internal development of BMC, which handles new ideas and products. We believe that there has to be internal specialization, but times change, and when opportunity knocks, we want to be there and acquire new companies."
Israeli companies?
"Perhaps. We have a team in Israel examining companies. We are negotiating with several. We are doing the research slowly, however, searching for an opportunity to acquire a company that is truly suitable for us and synergistic with BMC's strategy."
Gets along with everyone
BMC develops software products that enhance the productivity, reliability, and recovery of its customers' core business, based on information technologies. The products are designed for three environments: IBM systems, UNIX, and Microsoft. In other words, a company for all seasons. To put it simply, BMC products offer recovery, inventory, and service management applications; rapid access to information from databases; automatic processing of information technologies; professional services designed to maximize the potential of the customer's products; risk reduction; and balancing of the value of time versus money.
In what area will the Tel Hai center operate?
We will develop a product line there called INCONTROL, which is designed to manage large-scale production in large companies and organizations, including security, timetables, and streamlining of processes. That's the reason we acquired OptiSystems, which will develop management products. OptiSystems's existing developments will be the basis for additional management products."
Why Tel Hai?
Barnea intervenes: "We didn't go to the Galilee because of the Investment Center. We receive benefits from the Investment Center, but they came in after we decided to set up the development center in Tel Hai. We knew we would have to absorb new employees, which in Israel is no simple matter, and we also were searching for a way to contribute to the country. We examined places in the north and the south, and the Tel Hai college was perfect. The college trains 40 engineers each year, who want to continue living in the Galilee, and who need employment.
"In addition, on the opposite side of the road is the Tel Hai industrial park, where the market price of land and buildings is a tenth of the price in Tel Aviv, so we decided to locate our center there. At the end of the process, we received tax benefits from Investment Center manager Haviva Cohen, but we would have set up the development center there without them. At the cornerstone laying ceremony, Max will distribute six student scholarships."
Smuggled intelligence
Your largest competitor, CA, is developing software based on artificial intelligence. Will you also develop products like this?
Watson jokes: "We believe in real, not artificial, intelligence. The product developed by CA, Neugents, has been on the verge of taking off for several years. A year ago, they said that it would take over the market at the beginning of 2000, and at the beginning of 2000, they promised it would happen at the beginning of next year. Our forecasting software has proved itself very successfully in the market for several years, and artificial intelligence has so far showed very little market potential and very little commercial success."
What will you do in the future?
"We will tie all the software together, so that the customer will have one diagnostic program constantly examining the environment, deciding what should be done, timing steps, and integrating them into the timetable system. It will perform all this easily and rapidly."
CA is entering the B2B field. What about you?
"Of course we are, and that's one of the reasons we acquired OptiSystems. Today B2B serves companies wishing to do business and exchange information on the same platform. The next step is to mange the information exchange software, including integration of the other systems of the same companies, under the B2B platform, including inventory data, timetables, and security. The system will manage processes, not just products, and it is designed for Internet companies and service providers."
"We are coming out with a new brand name, entitled 'BMC OnSite', like 'Intel Inside'", Barnea adds. "The brand name will establish BMC as the quality standard, which guarantees quality and reliability."
Do you get along well with the competition?
Watson grins: "It's great. You have to enjoy it. If you're afraid of change or competition, you'll fail. I believe that competition improves you. My work is to lead, to help the company understand the need to change, to adjust to the market, and to provide an example.
"I won't stop changing until the end of my professional career, and I intend to stay at BMC until the end of my career. I have been working at the company for 15 years already, and I have no desire to go anywhere else. This is the third and last company I have worked for.
Published by Israel's Business Arena on July 3, 2000