May 5th, 2009
HP Software: Talking strategy; Looking to grow; Gunning for Teradata
Hewlett-Packard’s software unit is tiny relative to the company’s overall revenue, but it is being counted on to fuel future growth. The plan: Expand into the data warehouse market occupied by the likes of Teradata, focus on performance and project management and continue to automate data centers.
The hard part for HP’s software unit: Standing out when it’s dwarfed by the company’s hardware, printing and services (EDS) units.
HP’s software unit had fiscal 2008 revenue of a little more than $3 billion and the company argues that it is one of the more formidable software units you’ve never heard of. Built through the acquisitions of Mercury (2006), Peregrine (2005) and Opsware (2007) as well as HP’s OpenView software, the unit focuses on automation primarily.
Here’s a look at where HP’s software unit fits in the grand scheme of the IT giant.
The first quarter:
And fiscal 2008 tally:
Although that annual revenue tally would make HP a top 10 software unit in terms of sales it is dwarfed by IBM’s software division, which had annual revenue of $22.1 billion. I spoke with Robin Purohit, vice president and general manager of HP’s software products, to get a read on where the division is headed.
I noted that I can sum up most software companies in three words or less. Oracle is database and applications. Microsoft is Windows. IBM is middleware. But HP draws a blank for the most part, but there was a data center automation hook of some sort. What does HP software stand for?
Purohit said “management and automation is our core business” and 90 percent of what we do is automation. The big theme for CIOs is reducing costs and eliminating waste, HP’s software—fueled by acquisitions like Opsware—enables execs to be as lean as possible. That boils down to roughly data center automation where HP competes with three big players: IBM, CA and BMC, a group Purohit segmented off because they focus on mainframe software. HP doesn’t.
On the role of virtualization, Purohit said that HP is positioning itself to manage a virtualized environment and plug together virtual networks and storage. I noted that VMware is doing the same thing and asked for Purohit’s assessment. He said:
VMware is both competition and a big partner. Purohit added that HP is VMware’s largest distributor and it has an integrated management offering that comes with the company’s hardware as a bundle (see Matrix as an example). HP’s software unit also aims to be independent so it also works with Hyper V as well as VMware and naturally its corporate siblings.
On the market in general, Purohit noted that HP’s software is finding an audience because it’s focused on automation and “doing more with less.” He said:
“We think our opportunity comes when companies look for the best platform to virtualize. Clearly companies are looking for partners to reengineer the data center.”
But what about distribution?
Purohit said that HP is using an OEM model to distribute its software. And HP’s other units are the primary OEM. “I’m on the road half to two-third of the time with our storage and server groups,” said Purohit, who added that EDS is also offering HP software in bundles. “We’re always going to leverage our huge distribution channel and there are opportunities to embed our software.”
On re-engineering the data center and Cisco Unified Computing System, Purohit said:
“Every customer I talk to want to have a radically different approach to the data center and most want to go fast.”
Regarding Cisco Purohit said the networking giant is putting out “a great example of interesting future model, but based on future technology.” Purohit added that HP’s software unit will support Cisco’s Unified Computing System, but thinks the effort will “play out over many years.” “We don’t think any customer has the patience for future conversation that’s beyond six to nine months,” he said.
Does anyone have a data center greenfield?
Purohit argued that there are more greenfield data center projects than you’d think. He said that any massive data center consolidation is really a greenfield project. Why? If you consolidate 30 data centers to three like HP did you essentially shut down the old ones while using the latest techniques for the new ones. The new data centers are the greenfield where companies can push the envelope on automation, power savings and latest IT management techniques.
What is HP’s software as a service strategy?
Purohit said that HP’s SaaS offering are thriving. Nine to 18 months ago, HP offered SaaS delivery as an option, but in the last six to nine months customer demand for SaaS has picked up. As a result, HP is retraining its channel to deliver its software via SaaS.
Does HP plan on getting into applications given companies like Oracle is dabbling in hardware?
Purohit said that HP has no intention of entering the applications market. Instead, HP is focusing on the project and portfolio management of those applications.
What areas are ripe for HP Software expansion?
Purohit said that HP’s software unit will focus on “dealing with information explosion” and all the corporate data that sits in a company’s databases, digital content repositories and email servers. Purohit argues that HP Software can take advantage of e-discovery and e-surveillance requirements and figure out how to leverage that information for the business. HP already plays in the business intelligence space, but Purhoit indicated that the company will increase its focus on the backend data used for analytics. In that market, Teradata will be the biggest rival.
As an aside, chasing Teradata’s market isn’t an original idea. Oracle also mentioned Teradata a lot on its last earnings call.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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