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OpenView of HP's software strategy

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CIOL Bureau
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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

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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.

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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.

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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.

 

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.

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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.

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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.

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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.

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The CIO’s Path to the Boardroom

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.

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