Micro Focus is one of the few tech companies claiming to stay strong despite the downturn. It has integrated five acquisitions in the last two years. It is banking on expanding into automated software testing with the recent buyouts?Compuware and Borland, for a total of $133 million. Interestingly, the company is quite bullish on COBOL, the 50-year old programming language written off by a big majority in the industry. ?90% of the world?s financial transactions still run on COBOL and 75% of business data is still on COBOL,? says Jorge Dinares, president?international, Micro Focus, EMEA, India and Latin America. In a chat with Pragati Verma, he explains how they have benefited from tighter capital expenditure budgets as he dwells on the future of COBOL. Excerpts:
How does Micro Focus manage to grow despite the shrinking IT budgets?
Slowdown of the economy has not impacted us negatively. We have grown 20% and our numbers look even better in international markets. CIOs are under a huge pressure. In the last 20 years, the IT budgets have always grown, even in the crisis of the 1991-92. And now we are seeing reduction of 20-25% and even 30% sometimes. CIOs need to reduce costs and they have to show results in a short time. So nobody is working on big projects. During a slowdown, they need to keep the business going. So, modernisation is a nice solution for them because they can rethink applications and show improvements. For instance, some customers are willing to change the interface; move to a Web interface or move from being an internal application to an external application which can be used by partners or customers. Once they are on our platform, they can decide to migrate to an operating system of their choice or whatever environment they want to migrate to. In that move, they can save a lot of money. These reductions are 60% to 70% on maintenance cost only for operation. In most of the projects, the paybacks are cheaper and this is what the businesses want to listen to. These projects can help get returns in less than 12 months.
Do most CIOs expect to see returns in 12 months?
Yes, most of them do and even the very big ones expect returns in 15-16 months. When the companies want to see results in a short period of time, it is really difficult for them to take a decision on investing in a new ERP as returns won?t come before three to five years. Most of the industry today cannot afford to wait that long. So, they are supporting their current applications and want to improve functionality.
How does it work in India, where there are fewer legacy systems?
In India, we have a little different approach to modernisation. For example, with system integrators, when we talk about our solution to them we offer solutions like MFE Express or Modernisation Workbench. Our solutions are oriented to give more productivity to the system integrators. But at the same time, we are talking to India system integrators about going jointly for modernisation projects globally.
Do you see synergies with Indian systems integrators in the global modernisation market?
Well, expectations are coming from both sides. Some Indian companies already realise there is a huge opportunity in application modernisation. So they create a centre of expertise and excellence around technologies like ours. They will be able to go to the market to their customers and offer them a very aggressive proposal in terms of converting applications from what they do right now to what they should do. That is the opportunity they see. From our perspective, system integrator prescribes our solution which is natural. They have their own customers who trust them and if they can really demonstrate that they have expertise in that area, customers will follow their suggestion and then our technology will be sold. It is a very clear synergetic business. We have already done this with L&T and have already signed for the centre of excellence.
Some Indian system integrators are big players at the global level and already have modernisation practices. Some of them started with rewriting proposal. But the rewriting proposal has a bigger risk than a modernisation proposal as here they are starting everything from scratch and developing everything from scratch. In a modernisation proposal, the cost is more limited and more important and the risk is reduced dramatically. We have 100% success rate on modernisation projects. When we start a project, we always deliver what we promised to the customer. So that is for the system integrators also; it is a technology that works, makes everything easy and reduce the cost, low risk, so that is a very strong message. In terms of cost, I think there can be a 30% to 40% difference. Modernisation is better in terms of time to market and specially risk because I know of many rewrites projects that have had very serious problems. Rewriting a project is very complicated.
As they modernise their application, are CIOs moving to cloud?
The first ones moving to the cloud are the ISVs. Most of them are already investing on having their applications ready for the cloud. We support several connotations of cloud computing. For us, the approach is we can work on Microsoft Azure or we can work on Windows or we can work on Linux. It is just another operating system for us.
We now support Amazon, Azure and Google. So that is the kind of advantage we have. Every single CIO wants to start from applications on the cloud computing environment. That is a great opportunity here again for system integrators and companies that will deliver services through the cloud. It will change completely. It will come as platform-as-a-service and that kind of approach that will change the economics in the market. And that?s always good.
You are promoting COBOL as a company that is perceived to be old-fashioned by most CIOs?
More than 70% of the applications are written in COBOL. Most of the transaction oriented applications, let?s say more than 80% in that case are based on COBOL and they are very reliable and very effective. And a lot of CIO?s doing an application in COBOL and another one in Java know that the performance of the application could be 4 to 5 times faster and efficient in COBOL than in Java.
The idea should be to combine the strength of languages. You can always have your business rules, everything you have put together in the last 10 or 20 years written in COBOL, having that as an object and then combining that with Java or .Net, which is what most of our customers do by now. But COBOL is like a classic music and we continue listening to it because it is so good.
If we analyse all the languages that have been developed in the last 25 years, majority of them are not there in the market. But COBOL is still here after 50 years because it is good and it does what it is supposed to do. And the customers know and the CIO?s they know.
Do the people out there also believe that COBOL is there because it is tough and expensive to rewrite applications?
No, I do not think so. Let me tell you something. I can tell you big projects we are doing. Customers decided years ago to invest in a 4GL language to develop their applications and after a period of time, for whatever reasons, they are now moving their applications, the part that is related to the code, the layer of business intelligence to COBOL. They really believe and see that there is a value coming from COBOL.