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 mn 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 avatar. 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 HPs 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. 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 a 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.

E Abraham Mathew in Seattle