July 24th, 2007
HP's Spending Spree - Acquisition of Opsware and Neoware
Over the past few days, HP has announced the acquisitions of Opsware for $1.6 Billion and Neoware for $214 Million. Let’s look a little more closely at what may be behind these moves.
As the industry does its best to move from a physical view of the world to a logical view to obtain several different benefits, virtualization technology has come to the forefront. Although Hewlett-Packard has been one of the historical leaders in this area and has acquired other leaders in the past, it has not been top of mind in today’s recent rush to virtualize nearly every aspect of computing. A herd of small companies have grabbed a mindshare lead over HP.
When a company, such as HP, discovers that it’s products and future product plans don’t match the direction the world is moving, it faces a difficult challenge. The key questions on minds of the company’s strategists are:
- Should HP try to “engineer” its way out of the problem and develop new products that help customers go in the direction they want to go? This approach takes time and costs quite a bit of money.
- Should HP build a set strategic alliances with other companies to obtain the needed products and product expertise? This approach can result in the company taking an “industry followship” and gathering the reputation that “we’re more me-too than anyone!” It can also mean that the company’s ability to innovate and compete are marginalized.
- Should we acquire companies that have developed the technology we need, have the product strategists and engineering talent we need to get back in front of market trends and then have to deal with the issues of different development standards and corporate cultures in order to build a unified product portfolio.
The spending spree we’ve just observed demonstrates that HP chose the last of the three options. Although these acquisitions hold out the promise of strengthening HP’s software portfolio in the areas of management of virtual systems and virtual access solutions, it is not at all clear that HP will be able to meld Opsware’s and Neoware’s offerings into its own offerings quickly or smoothly.
If we consider past technology acquistions, the road ahead might be quite rocky. It took years for HP to digest Compaq which was itself suffering a bit of indigestion after its acquistions of DEC and Tandem. Will a “patchwork quilt” approach be workable in the fact of other supplier’s more integrated approach? We’re all going to have to watch what happens next.
Do you believe that HP will be able to integrate Opsware’s and Neoware’s offerings into its own portfolio?
Will customers who selected Opsware or Neoware because they were platform neutral continue to think of these companies as neutral once they’re part of HP?
Will engineers and product strategists who are part of Opsware and Neoware (very small companies when compared to HP) be happy working for a very large company or will they leave?
Daniel Kusnetzky is a member of the senior management team of The 451 Group. He is responsible for research and publications on a broad array of technology topics. He examines emerging technology trends, vendor strategies, research and development issues, and end-user integration requirements. You can follow Dan on Twitter. See his full profile and disclosure of his industry affiliations.
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