BMC Lops Heads

BMC Software Inc. (NYSE: BMC) last week cut 3.5 percent of its work force, or 232 employees, less than a month after the management software company shuttered its standalone storage group (see BMC Folds Storage Unit).

About 20 percent of the total layoffs, or around 45 employees, came from the Patrol Storage Manager (PSM) group, according to BMC spokesman Eric Krueger. The layoffs occurred last Thursday, Feb. 27. There were around 120 total employees in BMC's storage unit, most of whom found positions elsewhere in the company, he says.

"There was a concerted effort by senior management to try to reallocate resources [ed. note: a.k.a. people] in other high-growth areas in the company," Krueger says. "Unfortunately, we couldn't find a spot for all of them."

Last month, BMC said it would phase out PSM, the company's flagship product for managing open systems storage. It will continue to support the most recent version of PSM, version 2.2, but BMC "has decided to curtail any future investments in PSM," company officials said at the time.

The company said it plans to continue to invest in Mainview Storage Resource Manager, its storage management package for OS/390 environments, and will continue to develop PSM Knowledge Modules (KMs) for storage devices.BMC says the layoffs are the result of a shifting of resources as it approaches the start of its 2004 fiscal year, which begins April 1. As part of that realignment, the company is staffing up its inside sales force and areas of high growth, including service management software and the Remedy helpdesk software product line, which BMC acquired from Peregrine Systems Inc.

What happened to BMC's storage push, then? A year ago, the company identified storage -- along with other areas, including security and Linux -- as major growth opportunities. The bet on storage simply didn't pay off, says Krueger: "A few weeks ago, senior management took a hard ROI [return on investment] look at what it was getting from the storage division, and they had to make a hard decision," he says. "The return on investment just wasn't there."

Until the storage group was dissolved, BMC had been in the midst of readying the next version of PSM, version 3.1, which was going to integrate automation technology licensed from startup Invio Software Inc. (see BMC OEMs From Invio).

Randy Kerns, senior analyst with Evaluator Group, says BMC recognized that the open systems storage resource management revenue was going to have a longer payback time than some other opportunities. The company's decision "reflects the economic times we are in and -- to some extent -- the fact that most storage management software is being sold in the enterprise data center space as packaged deals from a very small set of vendors," he says.

The leaders in the software management space are Computer Associates International Inc. (CA) (NYSE: CA); EMC Corp. (NYSE: EMC); IBM Corp. (NYSE: IBM), including its Tivoli division; and Veritas Software Corp. (Nasdaq: VRTS) (see EMC, Veritas Both No. 1 in Software).For the quarter that ended Dec. 31, 2002, BMC reported revenues of $349.6 million and net profit of $12.1 million.

Todd Spangler, US Editor, Byte and Switch