There is plenty of action at HP’s software business unit. First, the merger
with Compaq brought in new products and increased reach in certain market
segments. Then came the annual user conference of HP OpenView, in which HP
extolled the virtues of OpenView and kept mum on the rest of its software
strategy. And now, as if to close the loop, HP has announced that it is pulling
the plug on Bluestone and Netaction
The New HP, the IT giant created by the merger of HP and Compaq is now No 9
on the Fortune 500 list with annual revenues close to $80 billion. The company
is among the top three share in all major segments. The statistics appear
impressive until you take a closer look at the software business of HP. Placed
in the Enterprise Systems Group (ESG) of the new HP, the software business of HP
is the fifth largest software business in the world and amounts to nearly $ 4
billion in revenue terms.
Apart from its size, HP’s software business is also crucial to the overall
game plan of the new HP. Over the last couple of years, HP had identified the
need to be amongst the big boys of software like IBM and Microsoft. The
acquisition of Bluestone in an all-stock deal for $ 470 m was a carefully
planned move by Chief Executive Carly Fiorina to catapult HP into a new software
area.
There seems to be a thrust from the top management of HP to strengthen the
software business as HP moves forward in its new avataar. Meanwhile, the
Head of the Software Business unit, Nora M Denzel, has reiterated HP’s
commitment to its customers in the software business. Though the merger with
Compaq was primarily driven by advantages on the hardware front, the software
business of HP also benefited as it enhanced HP’s offerings for client and
server management solutions.
Perhaps the best example for this is the TeMIP solution from Compaq which is
a market leader in telecom network and services management and is now a core
product in HP OpenView offerings. "The merger with Compaq makes OpenView
and all of HPs software stronger. There is only the upside from the Compaq
merger," said Patty Azzarello, vice president of HP’s OpenView business
unit.
The stated objective of HP’s software business unit is to provide service
oriented infrastructure software that best serves its customers. In order to do
that, HP has put together a software model that indicates that it will invent
code for some areas while partnering in others. HPs model starts with the
platform layer forming the foundation and the three layers of infrastructure on
demand, middleware and business applications completing the stack.
According to Denzel, the company would create code for the platform,
infrastructure on demand and middleware levels. The business application level
would be addressed by partners who would also get a partial look at the
middleware level. If there is a star in HP’s software business, it has to be
the HP OpenView portfolio.
With over 1,35,000 installations, OpenView’s market success has been
impressive and is today a widely respected network and systems management tool.
"HP OpenView solutions offer a comprehensive portfolio of software
solutions for managing and optimizing business services that run over IT, voice
and data infrastructure and multi vendor operating environments," said
Azzarello at the annual OpenView user conference held in end-June at Seattle,
Washington.
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The user conference also saw HP announcing various additions to the OpenView
portfolio. Among the new products announced were HP OpenView Storage Protector
and HP OpenView Storage Area Manager. The former is a successor to an earlier
product, Omniback II, that delivers higher levels of recovery in a services
driven environment. The latter controls and monitors the availability, usage and
cost of multi vendor resources across the storage available on a network.
New product introductions for OpenView have been driven through a mix of ‘invent’
and ‘acquire’ strategy. "HP Invent as a rule is true for HP overall and
for OpenView. 80% of code we invent and the rest is acquired," said Peter
van der Fluit, VP — Worldwide Software Sales and Marketing. "We are
constantly looking at opportunities for acquisitions in order to get to market
faster and therefore in the OpenView ecosystem we will be inventing, buying and
partnering," added van der Fluit.
Analysts monitoring the software business unit of HP agree that OpenView is
the core product suite on which much of HP’s software success has been built.
According to International Data Corporation, OpenView is well poised to address
the evolving needs of customers and that with the addition of TeMIP, fortifies
its position in the management market.
Another big plus for OpenView is the fact that it is platform agnostic. In
the opinion of the Martin Marshall Group, IBM and HP have the best vision of
integrating their software with that of others to achieve an overall web
application performance environment.
Apart from the interest generated by OpenView at the annual HP software
forum, there was speculation rife about the future of Bluetstone and Netaction
suite of products. At an OpenView management roundtable, a HP spokesman said
that HP was evaluating what to do with Bluestone and that the market was very
different when HP bought Bluestone for $470 million.
On similar lines, when asked about Netaction, Azzarello stated, "Due to
the merger with Compaq, the overall support requirement has increased. We are
revamping the Netaction strategy and you will be hearing about it in the coming
months". True to its word, HP has announced their Bluestone and Netaction
strategy in less than a month although it may not necessarily be pleasant news
for some users.
HP has announced that it was closing its loss-making Bluestone division it
bought a year a half ago and would concentrate its resources on software systems
to manage networks. This means that HP is pulling the plug on three middleware
platforms, used to glue networks together, including the Bluestone application
server platform it purchased and two platforms it developed, the Netaction Web
Services Platform and the Web Services Registry.
So where does that leave HP’s software business unit? According to Denzel,
the latest move will not affect either the fifth ranking or revenues
significantly. In fact, she predicts the remaining pieces will increase the
revenue for the software unit and coupled with reduction in expenses, will see
the division earn profits.
Having signed an agreement with BEA Systems for its application servers, HP
has demonstrated nimbleness in understanding market dynamics and sees no
hesitation in shutting out Bluestone and thereby stemming the losses. A good
example of the theory of make, buy or partner at work to get to market faster.
Going forward, HP’s core focus will be to differentiate in key areas where
it has established a leadership position. These are in service and
infrastructure management solutions through the HP OpenView portfolio, industry
specific middleware for telecommunication as in HP Openview TeMIP and management
solutions with a focus on Utility Data Center support and on the emerging web
services. No prizes for guessing that its successful OpenView portfolio will be
continue to be the star in the future too. A case of HP viewing the software
market through OpenView.
Fifteen years ago, if one would have asked a CIO (or EDP/ MIS manager) about
his ambitions, he would have probably said, "My first priority is to
convince the management that computers are indeed required. Then I have to make
sure that more and more aspects are computerized. I also have to ensure that
breakdowns are kept to pretty manageable levels. Lastly, I want to continue in
this job till I retire."
Today, this is what you would probably hear from a CIO, "We have
computerized almost all aspects of the business. We need to demonstrate RoI for
the investments made. We have our own P&L, you know. Also, in three-to-four
years, I want to join the board. That’s my ambition."
It may be difficult to imagine the CIO in the board room. After all, the CIO
is expected to run computers and not the company. While that is true from a
traditional sense, the horizons for the CIO are changing significantly and
pretty fast. If one looks back and tries to pinpoint the main drivers for the
shifting horizons for the CIO, it would include buzzwords like Total Cost of
Ownership (TCO) and Return on Investment (RoI). From saying, "Oh, that does
not apply in my case", today’s CIOs are more than eager to demonstrate
high RoI and lower TCOs.
Not too many CIOs have adopted these concepts by choice. In most instances,
they have been driven down by the top management. Illustrating this was Nora
Denzel, head (software business unit) of HP, when she said, "The top
priority today is cost-cutting."
There are several maturity models for the CIOs to choose from. Almost all of
them move from the reactive to proactive to the value addition stage. In the
reactive stage, the primary concern of the CIO is to provide IT infrastructure
and make sure that it works most of the time if not all the time. With tighter
financial budgets, the CIO’s emphasis is on managing costs. In other words,
the CIO is in charge of a cost center. Most of the organizations in India and
over two thirds in the US are operating in this stage of maturity.
The next stage is to progress from being an infrastructure provider to being
a service provider. In this phase, the CIO begins to understand how the IT
infrastructure in the company has a direct effect on the level of services
provided in the enterprise. CIOs have extensive discussions with various
departments and negotiate service expectations.
These are documented in the form of service level agreements. Another option
at this stage of the maturity model is for the CIO to start charging for some of
the services that he provides. The marketing team could be charged for the
amount of bandwidth consumed during their video conferences, database usage can
be charged for or perhaps even email usage.
Not many organizations in India have got into this stage and less than 25% in
the US are operating at this level. At the final stage of the maturity model,
the CIO operates as a business partner. The value that the CIO provides is not
restricted to cost savings and RoI. It extends to business planning and he
begins to deliver services that drive competitive advantages. He gets replaced
from being a infrastructure provider to being a irreplaceable business partner.
The final destination is the boardroom. Few organizations are in this level of
the maturity model.
HP OpenView believes that in today’s environment, the need for cost-control
will force CIOs to change from being infrastructure providers to becoming
service providers, and ultimately to business partners. The path to this
transition is through service management.
According to HP OpenView business unit vice president, Patty Azzarello, CIOs
need to understand the new way to communicate the value that they bring to the
enterprise. "Service management has gone mainstream and the RoI in service
management is absolutely compelling," says Azzarello. In the view of HP
OpenView, implementation of service management would mean that the IT department
enters the business planning process and delivers services for competitive
advantage.
Is the CIO supporting the business or is the CIO a business partner? To
insurance-proof his career, he needs to ensure he moves up the maturity model
and operates as a business partner and, in the process, gets into the boardroom.