HP sets up software and services battle with IBM, Oracle, Dell

It has been a busy 24 hours for HP. As well announcing an $11.7bn deal to acquire Autonomy the company also said it would be discontinuing its webOS range of devices, including its TouchPad tablet that launched just a few weeks ago. Oh, it also said it is considering spinning off its PC division.

That’s right, its PC division, which contributes billions of dollars to its yearly revenue. It’s a move reminiscent of IBM’s decision to ditch its PC business in 2005 by selling it to Chinese firm Lenovo to concentrate on services and software. That move undoubtedly paid off, but will HP’s?

It’s certainly a brave move by CEO Leo Apotheker as he positions the company alongside IBM, Oracle and Dell in the battle for software and services domination at big businesses across the world.

Dump the hardware, reckons Apotheker. Leave that to someone else – Apple has won that battle, so why continue to invest in the TouchPad? Worry about the software and the services users need. Concentrate on the back-end infrastructure, on cloud, on virtualisation. That’s where the money will be, Apotheker hopes. That’s why it has spent $11.7bn on Autonomy, to lead its information management portfolio.

Does HP have what it takes to compete with the other players in the space? It doesn’t have a particularly proud history in software. In fact Quocirca analyst Clive Longbottom told CBR HP simply, "doesn’t understand software." TechMarketView’s Angela Eager added HP’s heritage in software is, "very limited."

The issue is that there is no clear opening for HP in the space alongside Oracle, IBM and Dell. "HP is neither fish nor fowl," Longbottom told CBR. HP lacks a full hardware stack like Dell and doesn’t have a full software and services stack like IBM and Oracle. Its middleware offerings, for example, are pretty much MIA, Longbottom added.

The other obvious advantage Dell can claim is its use of its supply chain and the way it squeezes value out of it. HP has become "profligate and flabby" on that aspect, according to Longbottom, and may well find it a challenge to regain control from that point of view.

It is too early to say if this shake-up will pay off for HP and Apotheker, but perhaps focusing the company on the growth areas of software and services, and in particular information management, will prove to be an inspired move.

And if not and it all comes crashing down, at least it will still have its print business…

Type: White Paper


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