Enabling Ecological Data Centers: Rackable Systems CEO Mark Barrenchea (Part 4)

SM: From your perspective, what does it take to become a $1 billion+ company?

MB: When you have your core, you need to identify key elements and prepare for the transition. You need to bring your install base with you and make sure you transition them. You need it to have multiple geographies and routes to market. There was a McKinsey white paper that came out in the early 1990s that did a comprehensive survey of software companies that showed companies over $1 billion, those between $500 million and $1 billion, and those under $500 million, in a matrix that described their execution methodology. To my sensibilities, it seemed like they did the usual great McKinsey work dissecting what it took to be successful at the different levels.

Ether is very thin above $1 billion. In order to reach $1 billion a company needs to have multiple product lines, great bench strength, serve multiple industries and geographies, and maintain great install base management on every continent. Along the way some who got to $1 billion had a big brother relationship. The easiest example is Citrix, which grew from $400 million to over $1 billion with the help of Microsoft. Citrix focused on Microsoft technologies, which was counter to the Linux trends in the marketplace. That helped accelerate their path to $1 billion.

SM: They also have a very diverse portfolio of products.

MB: Today they do, but when they were just a few hundred million that was not the case. The Citrix traction and growth came from focusing on Microsoft. As Citrix got scale and cash flow they were able to get into other product areas. Today they have a very full portfolio. When I got to CA it turned out to be a different job.

SM: CA’s portfolio is extremely diverse as well.

MB: Amazingly diverse.

SM: How did you make sense of that portfolio?

MB: I sliced it into four parts; security, enterprise systems management, storage and BSO, or business services optimization. I got the organization in place, the people in place, the P&Ls in place, and the strategy in place and decided to start acquiring product. Then the CEO, CFO and general counsel all got indicted and went to jail.

SM: You were still there when all of that happened?

MB: Absolutely. I was one of the only outside executive members at that point. I worked very closely with the board, lawyers and the government as the executive ranks were cleaned. John Swainson came in from IBM to be the CEO. Jeff Clarke, who is now CEO of Orbitz, came in to be the COO.

Through all of that distraction I kept engineering running and innovating. We got to a point where we were able to start thinking about acquisitions by getting out debt down and becoming cash flow positive. We got cash flows up to $1.4 billion per year and did $2 billion in acquisitions. We bought Niku, which became an anchor in the BSO area. We also bought Wiley Technologies to be part of the Enterprise Systems Group. We also bought Netegrity for identity and access management. I committed to the board for three years and once those years were up I came back home and retired. That was 2006.

This segment is part 4 in the series : Enabling Ecological Data Centers: Rackable Systems CEO Mark Barrenchea
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