Users Seen Winning From Merger
Sterling Software, Systems Center Team up to Strengthen Complementary Products
Computerworld
April 12, 1993


When the acquisition of Systems Center, Inc. by Sterling Software, Inc. becomes final this summer, customers are likely to see a stronger, broader array of products for storage management and data transfer, including electronic data interchange (EDI), according to analysts and the companies' chief executive officers.

Two weeks ago, the companies said they will join to form the third largest independent systems management software company, with annual sales of $390 million.

“There is a great deal of synergy between [Systems Center's] VM business and our storage management business,” said Sterling L. Williams, president and CEO of Sterling Software. “We [offer] storage management products for MVS. They cover the other niche [VM] that we have long avoided.”

Williams said an even better fit is between Systems Center's Network Data Mover for data transfer among disparate environments and Sterling Software's SuperTracs product for data communications. He said the Sterling Software offering is “more powerful and versatile” for intercompany data moves, while Systems Center's product holds the edge for intracompany transfers. “I can see us going forward with multiple versions of a single, powerful file transfer product,” Williams said.

He also said Systems Center's Advanced Systems Management line of systems and network management products -- for things such as console management and configuration management -- extends Sterling Software's product line into areas the company had planned to go into anyway.

Hard times
Bruce Allen, vice president of services and systems management strategies at Meta Group, Inc. in Westport, Conn., cited a recent history of financial difficulties at Systems Center and said the merger is “extremely good news for both Systems Center and its customers.”

Of Sterling Software, he said, “Now they have more of a critical mass in terms of annual revenues to compete against Legent and [Computer Associates International, Inc.] in the overall systems management game.”

Systems Center Chairman Robert E. Cook, who will join the Sterling Software board of directors, acknowledged that added funds from the Sterling Software side of the ledger would enable Systems Center to speed the development of its products for problem management, change management and configuration management.

Williams said more acquisitions are likely, particularly in EDI, which the company is trying to expand into a broad business in “electronic commerce.”

But Williams said the firm confronts a paradox as it evaluates acquisitions. “Users want to deal with fewer vendors and fewer contracts on the one hand. But we're running into customers who feel they've been victimized by past consolidations in the industry.”

Despite the strengths both parties bring to the marriage, the new Sterling Software has its work cut out for it, Allen said.

“They are now in the top tier in terms of revenues, but they are still niche-oriented. They are out of touch with distributed systems management, with standards and with having a common architecture underlying all their products,” he added.

Sterling connections
One-third of Sterling Software's revenue comes from professional services for the federal government, especially for NASA and the U.S. Department of Defense. Sterling Software said that know-how will boost government sales of Systems Center's products when Sterling Software acquires the company.

Tough team
The combination of Sterling Software and Systems Center could create a potent force.

Sterling Software, Dallas
1992 sales: $259 million
1992 profits: $13.8 million
Employees: 2,246
Major product lines: EDI, storage management, applications development, information management, data communications

Systems Center, Reston, Va.
1992 sales: $131 million
1992 profits: $5.8 million
Employees: 900
Major product lines: Systems and network management, VM operating system utilities and software distribution