BMC has today revealed its intention to split into two independent software entities, one dedicated to its established mainframe operations and the other centered around tools for IT and distributed operations management.
Based in Houston, BMC has been under the ownership of global investment company KKR since 2018. The BMC name will continue for the company that retains the mainframe and software automation technologies, which include BMC’s Intelligent Z Optimization and Transformation (IZOT) and Digital Business Automation (DBA) units. The new entity, BMC Helix, will take charge of the Digital Service and Operations Management (DSOM) sectors.
“We believe that these two companies will more effectively meet the needs of their markets. Each has distinct profiles and growth potential, along with unique margins and profitability, and competitive environments. We are positive that the foundational economics of both businesses will enable continued innovation and long-term growth,” stated Ayman Sayed, president and CEO, in a message.
This strategic realignment is anticipated to provide advantages to both organizations as well as their clientele, according to industry analysts. Initially, the separation will allow each company to become more agile and better allocate resources according to their specific expertise. Additionally, customers from across the various product lines are expected to gain from this focused approach, experts suggest.
“One organization will focus on their mainframe business, which constitutes around two-thirds of the total revenues amounting to $2.3 billion, translating to approximately $1.5 billion from mainframe operations. The other organization, BMC Helix, will concentrate on the distributed business, which generates about $800 million in revenues. Typically, the landscape is dominated by three major players: Broadcom, BMC, and IBM, alongside several smaller entities involved in diverse mainframe sectors,” explains Stephen Elliot, group vice president at IDC.
“Clients are likely to gain advantages from this enhanced focus,” Elliot adds, highlighting a more directed distribution of personnel, budget, and other vital resources. “Previously, as a single entity, BMC was allocating a limited R&D budget among too many product demands,” he states.
With the separation, the distinct companies should accelerate the development of their products in their specific domains without the internal conflicts that often arise regarding feature prioritization. This shift could foster innovation in both the mainframe and distributed sectors more swiftly, according to Elliot.
This strategy may also facilitate strategic alliances that may not have been feasible when the diverse product divisions operated under one umbrella. “It’s important to recognize that now with two separate businesses, each entity is positioned to collaborate with vendors that may have previously been viewed as rival competitors. This creates some intriguing political dynamics,” he notes.
BMC has reiterated that the split will enhance the experience for customers and partners by refining the focus of each company. “Our customers and partners rely on us during their transformation journeys to facilitate business at an unmatched speed. As a strategic ally for continuous innovation in their mainframe, distributed, cloud, and edge technology requirements, the establishment of two distinct companies places them at the center of each entity’s mission, allowing for greater specialization and industry focus,” Sayed stated.
“Moreover, this also means KRR now has two possible pathways for financial exits, and the heightened focus could lead to each business achieving higher growth rates, consequently yielding greater valuations,” Elliot noted.
BMC Software was founded in September 1980 as a software provider for IBM mainframe systems and expanded its offerings over the next decade to encompass other platforms, including Windows. In May 2013, BMC announced its acquisition by a collective of prominent private equity groups, and in October 2018, it was acquired by KKR, a leading global investment firm. BMC first became a public company in 1988 but was subsequently delisted in 2013. In 2023, BMC submitted a confidential IPO filing.
BMC announced that the transition to two separate software companies is slated to commence in early 2025.
