CA Offers Software Subscriptions

Sanjay Kumar, CEO of Computer Associates, may own the New YorkIslanders, but he sure doesn't like hockey sticks. At least not hockey-stick sales growth rates: low software sales volume early in a quarter followed by a wild upswing when customers try to cut discounted deals as the quarter ends. So, CA is introducing optional software subscriptions that execs hope will quash hopes of last-minute bargains.

Customers opting for a subscription will still negotiate the size and length of each deal, but CA will account for deals monthly, rather than putting a $20 million deal, for example, on its books at the end of the quarter. This is no small matter for CA. Kumar says that of the $1.7 billion in revenue reported for the second quarter, ended Sept. 30, roughly $1 billion was booked in the last week of September.

"The company decided to bite the bullet and get out of the unstable business model associated with legacy perpetual-license models. We think it's a good move for shareholders," says Chuck Phillips, an analyst with Morgan Stanley Dean Witter. Rick Strum, president of research firm Enterprise Management Associates, says that since customers would be renting instead of buying software, it's possible that subscribing will cost more in the long run. But, he says, the lower monthly subscription fees, compared to huge lump-sum payments, will make it easier for CIOs to get approval to get the software.