BMC Bmc Software, Inc.

After securing an information and communication deal with Australia’s Monash University, BMC Inc. (BMC) is all set to roll out new product offerings to entice new customers.

BMC’s latest offering is the DB2 database management systems. This automation system will help companies offload certain work to z integrated information processor (zIIP) engines, which will help reduce CPU costs by proactively tuning inefficient SQL and by avoiding unnecessary maintenance.

This application will help to improve service availability by completing maintenance and change management tasks with minimal or no effort. The company claims that this system will improve productivity by simplifying day-to-day tasks and lower risk by ensuring that changes are based on some ethical standards. As a result, customers would be able to improve their IT system, at a comparatively lower cost, thereby improving their operating efficiency.

The offering is unique in a way, as competitors like Vmware (VMW) and Autodesk Inc. (ADSK) have not come out with such efficient database management modules, according to BMC management. This could be considered a unique selling proposition of the product, enhancing its competitive position. Although VMware’s vSphere4 is a respectable offering in this segment, it does not offer such significant features as DB2 does.

However, BMC is facing stiff competition in other product categories. The ever-increasing use of open-source software is also a significant challenge to BMC. Although the company has incorporated some open source software into its products, if the application of such open source software becomes more widespread, it will directly compete with BMC's proprietary software offerings.

The company has divided its business into two main units, namely Mainframe Service Management (MSM) and Enterprise Service Management (ESM), both offering systems management software and services to the end customers, although the nature of the products may be different. While the MSM’s business unit’s dealing in the mainframe computing market offers single-digit growth, ESM has much better volume growth expectation despite lower margins.

Growing server sales across the globe, the introduction of new systems management functions and growth in the virtualization and cloud computing space have opened up new avenues for the company. However, BMC is expected to face stiff competition in other areas.

Although the company has recently announced its intention to split up its MSM and ESM businesses, identifying a clear path for the growth of each business, we think this could result in duplication of costs and increase in marketing effort as each department will function as a separate business unit. This may put some pressure on the margin going forward.

Currently, BMC Software has a Zacks #3 Rank, implying a short-term Hold rating.

 
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