The evolution of HP Software

With HP Software's acquisition streak slowing over the past year, we are now getting a better idea of what the business wants to be when it grows up. With the recent absorption of HP's old consulting and systems integration professional services unit, HP Software finally has the resources to replicate the kind of solutions business that its communications and media units have already established. However, it still has plenty of work cut out for it, as the business faces the challenge of identifying and leveraging the assets that already exist throughout this diversified but traditionally loosely federated business.
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HP Software has reached Step One in building itself into an enterprise software business
Prior to CEO Mark Hurd's watch, software was an afterthought at HP, as a roughly $1 billion business that ran in the red. Three years and several major acquisitions later, HP Software has tripled its revenues to $4.2 billion and, in spite of revenue declines over the past year, operating margins have held at industry-low double-digit norms. While HP Software may still be the company's smallest business, it is no longer ignored and has successively navigated the first step in establishing its viability.

Over the past three years, HP Software spread from its base in IT systems and telco operations management with acquisitions of Mercury Interactive, Opsware, and others. In turn, it took the old Tandem NonStop database business inherited with the Compaq acquisition, plus the Knightsbridge BI consulting practice, and reincarnated it as the Neoware data warehousing unit. Today, HP Software has four businesses including Business Technology Optimization (BTO), which encompasses the old OpenView, Mercury, and Opsware product lines and accounts for almost 70% of the business. The rest of the group includes Information Management (IM), Business Intelligence (BI), and Communications, Media and Entertainment (CME).

While some of the software businesses may have minimal synergies, there are clear opportunities, especially with BTO, BI, and IM, to deliver integrated solutions that extend and integrate the application lifecycle into IT operations. From reviewing the presentations delivered at a recent HP analyst conference, it is clear that such integration is in the long-term product roadmaps. We'll call that Step Two of HP Software's evolution, but that shouldn't be where things end.

Enterprise software vendors like HP Software are expected to be in the solutions business
Until now, HP Software has been primarily a tools business. Yes, it has improved the integration over the years, and the group is looking for synergies across its product silos. Yet, excluding early stabs from the BI and CME software businesses, HP Software has done little vertical solution development.

The good news is that with the EDS acquisition under its belt - and reporting to the same corporate parent as HP Software - HP could fold its formerly independent consulting and systems integration business into the software group. Roughly tripling HP Software's service force, it can now venture beyond traditional customer enablement (e.g. installation, training, and mentoring), into the business of developing value-added solutions.

For the more solutions-mature CME and BI businesses, the consulting staff has been folded directly into the software unit, and has begun organizing by vertical industry. However, for BTO and IM, consulting for now remains autonomous, with no vertical teams developed. Call that Step Three - one that's unfinished.

For instance, in North America, there are key opportunities for BTO and IM, especially with the Obama administration's federal stimulus spending, not to mention tens of billions that will be invested in electronic healthcare initiatives.

HP Software shouldn't forget the rest of HP
There are significant assets from the hardware businesses, including cloud computing IP from the enterprise server business, blade management from the PC business, and output management from the printer business. It's clear that HP has the assets and, with EDS, the resources to build solutions that could transform HP Software into a true enterprise software business. The challenge is that HP has traditionally been a very loose collection of businesses. HP should form a group whose mission is to unearth the hidden gems and apply a dose of its own PPM technology to locate, harvest, and track the assets as they are turned into solutions.

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BY Tony Baer
Source：Ovum

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