This research analyzes BMC Software's vision, strategy, strengths and challenges with respect to the IT operations management (ITOM) set of markets, and is part of a larger set of research on the ITOM market landscape.

• According to Gartner market statistics, BMC has the third-largest ITOM market share worldwide, with an 11% share in 2009.

• Approximately 60% of BMC's revenue comes from software that runs on distributed systems, and 40% is from software that runs on mainframes.

• BMC has particular strengths in product areas that represent strategic capabilities of an ITOM portfolio, including IT service desk, event correlation and analysis, server configuration management and configuration management database (CMDB).

• BMC's consistent, strong business service management message resonates well with ITOM buyers.

• Enterprises seeking a broad suite of ITOM software from a single vendor should evaluate BMC, CA Technologies, HP and IBM, taking into account how closely their software meets your objectives, as well as strategy, road maps, experiences of other customers (e.g., through user references), pricing and customer support.

• Ensure that well-trained professional service resources are available in your region, either from BMC or its certified partners, prior to investing in strategic deployments of BMC's ITOM software.

BMC Software is a member of the exclusive "Big Four" club of ITOM vendors that have more than $1 billion in ITOM revenue and focus on broad management functionality across a heterogeneous environment. BMC has more than 6,000 employees worldwide, and reported $1.9 billion in total revenue for its fiscal 2010 (which ended 31 March 2010). The bulk of that revenue comes from ITOM products, although BMC also plays in related non-ITOM categories of storage management, project and portfolio management (PPM) and identity and access management (IAM).

According to Gartner market statistics, BMC's 2009 ITOM revenue grew by 4.6% in a challenging market that contracted by 1.8%, thus increasing its market share from 2008 at the expense of HP, IBM and other smaller competitors. BMC reports that 40% of its fiscal 2010 revenue derives from mainframe management software. Mainframe growth is relatively flat; since a smaller percentage of BMC's revenue depends on mainframe software (relative to CA Technologies and IBM, which garner approximately 50% or more of their revenue from mainframe ITOM software), this causes less of a drag on BMC's overall ITOM growth numbers.

BMC's vision is business service management (BSM), which it defines as an IT management platform that simplifies, standardizes and automates IT processes so that IT can operate more efficiently and lean. It provides a mechanism through which information and processes are shared across multiple components so that the output of one phase of a process becomes the input for the next phase. BMC compares the benefits that BSM can bring to the management of IT to the benefits that ERP brought to the management of the enterprise. Rather than being a single "big bang" project, BMC guides customers, who start at a variety of maturity levels, on the journey to BSM through a number of customer-focused BSM initiatives and supporting "value paths": cloud computing, data center automation, IT cost transparency, IT decision support automation, IT service management, ITIL, mainframe cost optimization, proactive operations, and IT governance, risk and compliance.

Key strategies that BMC is pursuing to fulfill its vision are:

• Dynamic BSM for hybrid physical/virtual/cloud environments. BMC has evolved its BSM vision to become "dynamic BSM," aligning it with the dynamic nature of the virtualized and emerging cloud environments, with emphasis on continuous optimization. An example proof point of BMC executing on this strategy is its recent announcement of Cloud Lifecycle Management, which enables self-service IT (for example, for development and test lab environments), and which leverages its strength in server provisioning and configuration management. BMC is targeting enterprises that want to implement private cloud computing, and service providers that are seeking to implement a public cloud-computing platform.

• Managing the IT service life cycle spanning distributed and mainframe platforms. BMC views the service life cycle as encompassing the phases of request and support, provision and configure, monitor and operate, plan and govern, and integrate and orchestrate.

BMC has a consistent, strong BSM vision that simultaneously addresses the need for IT alignment and efficiency. It's a message that resonates well with ITOM buyers. BMC has been able to show a direct connection from its top-level message down to the sales of individual products in support of customer-focused "value paths."

Although late to the virtualization management market, BMC is now very focused on delivering capabilities where it can leverage its strengths in IT service support and the management of the physical infrastructure to move into environments that are a hybrid of physical, virtual and cloud infrastructures. It has very good foundational technologies that will help as it gets into the creation and management of private cloud services, especially its service request catalog and BladeLogic provisioning software. Its emphasis on IT business and financial management can help show cost transparency so that IT organizations and their business unit customers make better internal versus external, and private cloud versus public cloud, sourcing decisions.

BMC's view of the life cycle that it manages is constrained to the IT services that are in production or moving into production. This narrowed focus leverages BMC's strengths in IT service support and operations, especially with its Remedy and BladeLogic products; however, unlike some of its competitors, BMC is not involved earlier in the application life cycle.

All the Big Four ITOM software vendors are investing in integration architecture. BMC Atrium is the foundation of the company's integration architecture, centered on an internally developed, service-aware CMDB. Additional components of the Atrium foundation include Atrium Orchestrator, a run book process automation capability based on BMC's acquisition of RealOps; Atrium Discovery and Dependency Mapping, based on BMC's acquisition of Tideway Systems; and prebuilt analytics and dashboard/visualization/reporting functions that can be shared by many BMC products (see Note 1 for a list of recent BMC acquisitions). As the depth and breadth of integration increases, it enables BMC to more easily cross-sell customers to additional product areas and solidify a more strategic relationship with the customer through cross-IT process workflow. However, each new acquisition adds complexity and the potential to derail or delay progress toward the goal of seamless process workflow and data integration. Nonetheless, BMC has leveraged its early lead in the CMDB market and its large Remedy installed base to show the most production customer examples of successful execution on its integration strategy. BMC has been able to make rapid progress in achieving integration between its products, in part because its CMDB builds on the foundation of its well-established Remedy code base, and its acquisitions have been in closely aligned, logically adjacent markets, thus its integration efforts are more focused and potentially less complex.

Although many areas of investment (such as the integration architecture) are similar among the Big Four vendors, here are the areas where BMC's investment stands out as differentiated from its competitors:

• IT business management and financial management for IT cost transparency: BMC acquired ITM Software in 2008 to move into a more strategic position of managing the business of IT. Part of what BMC now calls "IT Business Management," the former ITM products, are available in five modules covering financial planning and budgeting, demand and resource management, service cost management, IT controls management, and supplier management. Although this puts BMC in a thought-leadership position, there are very few IT organizations that have the service management maturity to take advantage of this technology. Often, IT organizations are hampered by questions as to where the financial data will come from and how difficult it will be to find that data and load it into the IT financial management system. However, cloud service offerings bring into sharp relief how much IT knows (or doesn't know) about its internal service costs and will put pressure on the IT operations group to transparently communicate its costs so that business customers can weigh investment decisions between internal versus external, and private cloud versus public cloud, sourcing. Moreover, with general pressure on achieving year-over-year unit cost savings, we expect more enterprises will invest in cost management, at first to baseline their costs but then to analyze and optimize them.

• Small or midsize business (SMB)-focused service desk delivered as software as a service (SaaS) with salesforce.com: BMC is unique in leveraging salesforce.com as the platform to deliver its SMB (500 to 2,000 employees) service desk product in a SaaS model. That, along with Remedy OnDemand, has shown BMC to have a more nimble response to the SaaS licensing model that threatens service desk vendors with traditional perpetual license approaches. While service desk is its first product area to become SaaS solutions, BMC is evaluating other product areas for SaaS as well, and sees SaaS as broadening its reach into new markets. Next on its agenda is to make its cost management solution available in a SaaS licensing model in November 2010.

• Metrics and reporting to show business value realization from BMC solutions and from IT overall: BMC has a differentiated investment in its focus on building metrics and reporting in its products and services to show business value realization, from the BMC products, as well as from IT overall. IT operations teams continue to struggle to demonstrate their business value and their contributions, so this kind of business intelligence analytics, decision support and reporting is very helpful and resonates with customers at all IT service management maturity levels.

The following are a summary of BMC's ITOM software strengths and challenges.

Strengths:

• Value paths and cross-selling

• Infrastructure-neutral across hybrid physical/virtual/cloud

• Heterogeneity, including mainframe

• Industry partnerships (OEM, value-added reseller [VAR], and with other technology providers through its MarketZone program)

• Remedy installed base and breadth of integration adapters

Challenges:

• Limited C-level visibility

• Smallest sales force, not "at bat" in enough deals

• Professional services

• Lack of early application life cycle management (ALM) access with application development/quality assurance (QA) testing tools

• Preserving mainframe share and competitiveness

BMC's "value paths" enable cross-selling with prescriptive advice to achieve business outcomes from ITOM investments. Its infrastructure-neutral stance helps it drive revenue through service providers and system integrators because it does not compete with them. BMC's products are supported on a wide variety of heterogeneous platforms from mainframe to distributed systems, inclusive of Unix, Windows, Linux and most hypervisors. BMC's acquisition of BladeLogic has spurred company growth and enabled it to forge strategic new industry partnerships, including the OEM relationship with Cisco for the management of Cisco's Unified Computing System (UCS). Another key strength is BMC's more than 9,000 Remedy customers, and the potential to cross-sell other BMC products to those clients.

One of BMC's chief challenges is its limited C-level visibility. The size of its sales force and support organization pales in comparison with the other Big Four vendors, to the point that it is not "at bat" in enough deals simply because it's not present or visible in the minds of C-level IT and company executives. Quality of professional services is inconsistent, in particular when delivered through partners who may not be adequately trained or do not necessarily follow BMC best practices for software deployment. Some of BMC's competitors offer products earlier in the application life cycle, permitting them to be perceived as the incumbent and putting BMC at a disadvantage, especially for processes, such as performance and release management, that cross application development and IT operations organizational boundaries. BMC does not rely on revenue from mainframe management software as much as CA Technologies and IBM. Nonetheless, it is important for BMC to focus on maintaining mainframe market share and product competitiveness, because they are the source of funds for much of BMC's R&D efforts. Mainframe management software is a much more significant margin contributor versus the software that runs on distributed systems. (BMC reported a 57% operating margin for its mainframe management software business in its fiscal 2010, compared to a 21% operating margin for its distributed software.) While we consider it to be to BMC's credit that it has been able to reduce its dependence on mainframe revenue, it must guard against complacency and not permit other vendors to steal market share.

BMC has particular strengths in product areas that represent strategic capabilities of an ITOM portfolio, including IT service desk, event correlation and analysis, server configuration management and CMDB. BMC has a longstanding strength in job scheduling, which it has augmented with a strong run book automation (RBA) product from its RealOps acquisition. It is competitive in the IT asset management, virtualization management, network configuration and change management (NCCM), PC configuration management and mainframe management market segments, and partially competitive in the DBMS management segment because it chooses to play only in the mainframe portion of that market. With the exception of NCCM, BMC does not play in the network management market. BMC's sole weakness in ITOM is in the application performance monitoring (APM) segment. This is particularly surprising, because BMC's former Patrol products were once a powerhouse in server and application management, but lost their luster as the company focused on such strategic acquisitions as Remedy and BladeLogic. This weakness has allowed competitors to chip away at BMC's Patrol installed base customers, who became disappointed with BMC's availability and performance management products and road map and began looking for other alternatives. BMC is returning to its roots, though, and is determined to reinvigorate its APM presence. Gartner expects that BMC's acquisition of APM vendor MQSoftware, which BMC purchased primarily for its mainframe installed base, is just the tip of the iceberg. It remains to be seen whether BMC can restore its previous strong market position.

In markets adjacent to ITOM, BMC is competitive in PPM (from its ITM Software acquisition), weak in storage management and IAM, and does not play in QA testing (see Figure 1).