The
Success of Veritas Software
Professor Richard Birkenbeuel
Business Strategy
Peter Cheng Chung Man
Student ID # 48754
Overview
Mark Leslie graduated from New
York University in 1966 and gained lots of computer industry experiences by
working in some big companies like, IBM and Xerox as system engineer and sales
representative.
In late 1980, he started a new
company, Synapse, a venture to design and build big, fault-tolerant systems
around the merging microprocessor technology. Due to the magnitude of the task,
the company closed down in 4 years’ time.
In 1984, Mark became the CEO of Rugged
Digital Systems, which focused on products for military, was nearly running out
of business. He gave the company a new vision and focused the product
development and reduced costs. As a result, the sales increased from $2 million
to $32 million within 4 years.
In 1988, he entered the board of
Tolerant Systems, which was a fault-tolerant system design company, and he then
became the CEO when Tolerant was at the edge of closing down in 1989.
With Mark’s industry knowledge and
experience, he made few strategic decisions to turnaround the dilemma of
Tolerant Systems which was renamed Tolerant Software in 1989.
1. Critique the Strategy of
Tolerant Software
Tolerant Systems was created by Eli Alon in 1982, and its main competitor was Tandem Computers, which had a market share of more than 90%. With raised capital of US$50 million and six years of company history, Tolerant Systems was struggling to build fault-tolerant computer systems for transaction processing.
In 1988, Mark Leslie joined the board of Tolerant Systems since he could afford to invest minimal of time. At that moment, he was the CEO of Rugged Digital Systems, a computer company focused on products for military.
In 1989, Tolerant had dramatically missed its sales target and ran out of money. Thus the board had decided to lay off more than 90% of its workforce. From 200 employees down to 15 employees, Tolerant at last had to shut down the hardware business and keep its small software division. It was because software business had developed some potentially marketable applications for the Unix operating system, which was also profitable. They then renamed the company to Tolerant Software.
2. If you were Mark, would you join Tolerant
Software as CEO when he did? Describe the reasons for your decisions.
If I were Mark, I would definitely join Tolerant Software as CEO.
As Mark was confident in his personal ability to lead the company, together with experience turning around troubled companies, like Rugged Digital Systems, he believed he was the right person to run the business.
Moreover, he had the ability to keep costs from growing, and control the expenses to match its revenues. He also knew the importance of creation the team, the culture and the value within the company.
On the other hand, the co-development and co-marketing agreement between Tolerant Software and AT&T played a major part for sourcing revenues. Since both companies agreed to share the revenues from the products equally regardless of who sold them.
Mark also knew the essential of establishing strong relationships with the system manufacturers (OEMs). The OEMs would install software products on their systems to end customers. It was led to pull-through demand and generated sales. Thus, it would be profitable.
Finally, he believed the restructure of the board of directors was part of the important actions. With a new board and a new purpose, he led the new company, which was called Veritas Software.
3. Do you believe one decision affected progress
more than any other?
By changing the name of the company to Veritas Software, there were some critical strategic decisions that Mark and his management team had to make.
Mark firstly re-negotiated with AT&T so that Veritas had enough revenues to stay in business. Whereas AT&T already had the direct sales force to target the OEMs and promised to sell Veritas’s products alongside its own. Alternatively, Veritas received an income from 50% to 85% of the revenue regardless of who sold the products.
Since AT&T sold Unix licenses to OEMs, such as Hewlett-Packard and Sun Microsystems, which loaded the software onto their systems and customized it to their platform. Moreover, these companies sold integrated systems to the end customers.
Hence Mark had to decide: who were the company’s customers? The answer was: the fifty OEMs would be more manageable than innumerable end customers. Furthermore, it would be easier to generate the pull-through demand that was profitable.
The most critical decision as I think was the acceptance of Siemens Nixdorf’s offer. Having enough revenues to run the business was always an important criterion. Therefore, he sold its products rather than licensing them because he could at once received the $1 million in cash and kept the business on going.
4. Assuming you did join, would you have done
anything differently at the beginning of the term? Explain your actions.
As the CEO of Veritas Software, every strategic decision was essential. Though Mark made lots of decisions, which improved the situation and the company fiancé, I think he could make use of its strengths to diversify the markets.
In 1990s, not many computer software companies would think about people could order milk or eggs through Internet once they open their refrigerator. People could send email and leave voice messages via the fridge. Thus, Veritas could develop those kinds of software to suit the electric appliances. Some manufacturers, like GE, can be arranged to have joint venture business.
Conversely, I would not accept Siemens Nixdorf’s offer. As establishing royalty is not an easy job. It takes time. Therefore, selling your products in one deal that maybe selling your future. In addition, the $1 million cash could be 2.5 times in near future. Why not wait awhile and see how was it going to be. The $1 million might not be enough to run for another few months especially Mark preferred to give 5-10 % of the company’s equity to the investors.
5. How is Veritas doing today?
Veritas Software is a leading provider of software that enables utility computing. It is now one of the 10 largest software companies in the world.
It has been progressively expanding some major platforms’ products portfolio such as, data protection, high availability, storage management, server automation and application performance management software. These products are used by most of the big corporations.
The success of Veritas is by offering their clients the choice and flexibility to adopt major platforms, like Linux. They also maintain the IT service levels, which provide to their clients across the organization.
Nowadays, Veritas Software is continually delivering greater enterprise capability to major platforms and keeping the overall cost of IT management.
Conclusion
Veritas Software is currently headquartered in Mountain View, California and employs more than 6,700 people in 40 countries.
With annualised revenues over $1.75 billion in 2003, Veritas Software ranks among the top 10 software companies in the world. Furthermore, it is a leading provider of software that enables utility computing.
Their success is also tied to the success of their customers. Factors such as revenue, market share, and profits are certainly important; but most critical success factor – customer satisfaction that generate more sales.
That is why they work hand-in-hand with their customers to build smarter solutions for business efficiency and continuity – all of that support the vision of enabling utility computing through software.
END