Almost a year after HP’s key acquisition of Mercury, it is timely to review the state of HP Software, and assess its importance in the marketplace, both currently and in the future.
Mercury was a hugely significant ‘jewel’ for HP Software to win, and has made HP’s software portfolio overall look oriented more towards proactive, business-aligned management of IT than the apparent legacy focus purely on the data center. Although the HP Software business unit was doubled in size with the arrival of Mercury, it has not been the only element of the ongoing transformation, as HP has spent over $3 billion in other acquisitions over the last few years (mostly augmenting the HP Software stable), in addition to the over $4 billion price paid for Mercury.
Products from Bristol Technology, Peregrine, OuterBay, Novadigm, SPI Dynamics and OpsWare have been or will be assimilated into HP brands and product features, as well as the identity management products of Baltimore Technologies and Trulogica. Additionally, it bought consulting firm Knightsbridge to add to its services capabilities in information management.
HP now has two strategic areas of software capability: business technology optimization (BTO) and business information optimization (BIO), the former being by far the more mature range. Focusing on, and increasingly integrating, three pillars (strategy, applications and operations) that are seen as the key elements that link IT’s activities with the needs and direction of the business, BTO is now more in-depth by degrees than was apparent prior to the acquisition by HP. Numerous integrations are being devised and implemented that will be of very significant value to customers.
BIO is a much more long-term bet for HP. HP does not usually participate in market areas unless it can realistically aim to be one of the top few players. With the likes of Oracle, IBM, and Microsoft matching HP’s breadth in terms of platforms or middleware, and also offering customers the advantages of a broad range of information management capabilities, HP has a long way to catch up. For now though, it claims to be happy to specialize, and of the two initial offerings, its data warehouse solution NeoView is doing impressively well, gaining the sort of successes with leading lights in the retail sector, for example, that will demonstrate strong credentials and grab quite a few headlines
In all of its areas of activity, HP Software can offer evidence of its ability to execute its intended approach. For example, it has undertaken a huge program to give sales staff the necessary skills to bring BTO to the attention of company executives, extending their reach beyond their former audience within solely the customer’s IT function.
HP admits to having committed to aggressive targets in order to justify the scale of the acquisition of Mercury, but can now point to results that have exceeded those objectives. HP has been wise in establishing solutions for SOA, SAP, and Oracle technologies, and service management (particularly ITIL v3) that could be pivotal in convincing customers of the route to value that BTO can provide.
With such success to date, and considerable potential scope for more portfolio breadth (especially in the area of BIO), it is very doubtful that HP Software is yet drained of ambition. Neither is HP overall short of funds for further acquisitions, as revenues, margins and profitability have all been indicative of excellent company performance since Mark Hurd took over as CEO.
It will be interesting to see whether the color of HP’s money is shown in what now looks likely to be a competition of some sort for BEA, as kicked off by Oracle. HP would surely not view the circumstances of bidding against Oracle as ideal, but BEA’s range of software seems to fit well into the ‘stack’ now available from HP, atop an ‘adaptive infrastructure,’ and the underlying servers, storage and operating system offerings.
While reports as we go to press tell us that HP is not interested in putting in a counter bid to that made by Oracle, it is worth remembering that, in 2006, HP denied that a bid for Mercury was imminent only a short time before its bid was actually made. A willingness to skirmish in such a high-stakes battle could be another demonstration of how serious HP is about the development of its software business.
Source: OpinionWire by Butler Group (www.butlergroup.com)