Challenges loom on software side, though net management strengths give company something to build on
HP has opportunities and challenges in emphasizing its software and services offerings.
HP, the leading seller of servers and printers, is looking to make a much bigger name for itself in software. The company already is the sixth-largest software vendor in the world, though its $2 billion software business made up a small portion of its $90 billion-plus in overall revenue last year.
The company has steadily expanded its software empire through acquisitions, such as last year’s $4.5 billion buyout of Mercury Interactive. The issue at hand, though, is whether the company can build on its software and other assets to deliver on an ambitious vision of providing automated data center operations.
“It is not easy to change a company as large as HP from mostly hardware with some software on the side to a solution and services-oriented company,” says Jasmine Noel, a principal analyst with Ptak, Noel & Associates. “But HP is working at it by putting in internal systems and processes to better understand customer issues and provide realistic product road maps to address those needs.”
As the company hosts two customer conferences — HP Software Universe and HP Technology Forum & Expo — in Las Vegas next week, we take a look at five reasons why it’s good to be HP these days and five reasons why it isn’t.
It’s good to be HP
1. Network management prowess
HP is a technologist’s company. Products such as Network Node Manager and OpenView Operations (the OpenView brand has since been phased out to reflect the company’s broader software portfolio, including Mercury and Peregrine products) won over customers years ago.
“HP is known for network management innovation,” says Dennis Drogseth, a vice president at Enterprise Management Associates. Whether it is with internally developed products or products built on licensing deals with smaller vendors such as Packet Design and Voyence, Drogseth says the company delivers advanced diagnosis, analytics and troubleshooting tools to tackle diverse distributed networks.
“The company excels at engineering management products to address complex, sophisticated networks,” he says. “HP probably has more pure functionality than any other vendor I can think of, and certainly no one is surpassing them in management.”
2. Best practices knowledge
HP has made the best practices of the IT Infrastructure Library part of its product portfolio. Not only have HP employees contributed to ITIL Version 3, but the company has made a point to stay on pace with best practice frameworks as more of its customers embrace IT process improvements.
“HP’s investment in ITIL has been a good move and has provided a good foundation for its architecture,” says Paul Edmunds, a senior network analyst in the IT operations and systems management group at Duke Energy in Charlotte, N.C. His organization is currently in the process of implementing HP Operations Manager, and he says the company’s acquired software could help HP move beyond being known as strictly a network management vendor.
“HP has a good set of products that can be integrated to provide the service-level management view that so many vendors are after now,” Edmunds says.
3. Big Blue who?
There is nothing like beating your top competitor.
HP earlier this year surpassed IBM to become the worldwide market leading blade server vendor, and tied with IBM for second place behind EMC in the computing storage business, according to IDC. HP also in 2006 became the largest computer company in terms of revenue, with sales increasing 6% to $91.7 billion, compared with IBM’s year-end total of $91.4 billion.
“When you think of HP, you think of printers. HP leads that market. Then you think of servers. Now HP leads the blade market ahead of IBM,” says George Hamilton, director of Yankee Group’s enabling technologies enterprise group.
4. Customer loyalty
Long thought to have the largest installed base of network management software customers, HP has strengthened its position through acquisitions of big software vendors such as Mercury, Peregrine Systems and Novadigm.
“Customer base is far and away the company’s biggest strength” in expanding its software business, Noel says. “It doesn’t matter if the customers were originally OpenView, Mercury or Peregrine, they have remained customers in spite of previous neglect and scandal. Just imagine how loyal customers will be as HP’s internal improvements translate into account managers who can have meaningful consultative sessions.”
5. Product modularity
HP offers the best of both worlds — complete technology offerings delivered as modular products, according to one customer. Paul Stallings says HP understands that it must partner with its customers and not simply sell products to them in a one-off manner. The senior manager for provisioning services at Blue Cross Blue Shield of Florida in Jacksonville says he appreciates HP’s Council Advisory Boards, in which customers have the opportunity to relay their challenges in the industry to HP representatives and hopefully drive resolution and future development in the company’s product lines. Stallings also says he believes HP understands it can’t do it all for every customer and builds its products accordingly.
“Each company has a different landscape and may choose to integrate HP products with existing tools to manage their infrastructure,” Stallings says. “Companies that rely on proprietary integration among their own products only will constrain their customers.”
It’s bad to be HP
1. Historically weak on software
For many, it’s all well and good that HP says it wants to emphasize its software offerings, but they say history isn’t on HP’s side.
“HP makes great hardware, but I have never seen a respectable piece of software come out of that company,” says a technology architect at a university who asked not to be named. The software he has had experience with typically ran on HP printers or Compaq hardware, but it performed badly enough to keep him from purchasing a stand-alone HP software product.
“I’ve used HP All In One devices, whose drivers would frequently crash Windows, I’ve had scanner drivers blow up my machine, and even our current print appliances appear to our security scans to be running ‘very’ unpatched versions of Windows NT 4.0. So … hardware=good; software=near worst in the industry,” he says.
Industry watchers agree that HP has work ahead of it to boost its image in software.
“HP Software’s visibility and credibility has risen dramatically over the past two years in customer accounts and internally at HP,” says Stephen Elliot, director of enterprise systems management at IDC. “However, there is more work to do on account management and product integration, [and there are] portfolio gaps to fill.”
2. Technology integration challenges
HP also has a long product integration road ahead of it.
“Integrating the products into compelling solutions … is a perennial problem,” analyst Noel says.
While HP has had a couple of years to work on incorporating software from Peregrine, Novadigm and others into its portfolio, the Mercury acquisition could take integration work to a whole other level.
“HP does have a big challenge to effectively integrate Mercury,” Duke Energy’s Edmunds says. “There are a lot of components in its [Business Technology Optimization] initiative.”
3. Customer retention
Integrating acquired technologies will inevitably affect existing HP software products, which has some customers concerned.
HP buying Mercury is a good thing, according to James Maas, network monitoring engineer at Fresenius Medical Care in Lexington, Mass., in regards to the company expanding its application life-cycle management capabilities. But the acquisition can be perceived as a problem for customers struggling to hold on to existing HP products the company isn’t expected to support as it eliminates overlap and fully integrates Mercury products into its portfolio.
“A lot of customers that use HP OpenView products that are being phased out have to go to Mercury, and they are not too happy about that,” Maas says.
4. Corporate scandals
While HP’s software may not always be in the news, the company had more than its fair share of negative press coverage in 2006 in light of executives engaged in questionable and potentially illegal practices to uncover a leak on its board. HP recently settled with the U.S. Securities and Exchange Commission.
“The board’s tactics were inexcusable, but essentially isolated from customers,” said Charles King, principal analyst at Pund-IT Research, at the time of the scandal.
5. No defining platform
As HP works to integrate acquired technologies, industry watchers argue it may want to purchase more software to help it build a platform comparable to IBM’s WebSphere.
“HP’s lack of application or business process-management solutions, [along the lines of a] BEA or Tibco, can be perceived as a weakness as long as HP is positioned as an IBM alternative,” Noel says.
Others agree HP must have a platform, or a common underlying architecture, on which to deliver its products — and that management software doesn’t fit that bill.
“All the vendors HP competes with have a platform on which they center their products. IBM has WebSphere; Oracle is a platform,” Yankee’s Hamilton says. “HP can remain vendor-neutral with its management software, but it needs a platform to help round out its positioning as a true software company.”
