HP Software Lacks Any Semblance of Strategy

As we did with our look at the IBM Software Group (IBM), Research 2.0 analyzed the HP (HPQ) software business and published a detailed report (available at our website) looking at the business. Unfortunately for HP it paints a fairly grim picture.

Because HP has acquired and combined so many different pieces of software, it’s not surprising that family may lack a coherence (think HP, Digital, Compaq, Tandem). Between 30% and 50% of all existing HP software revenue has been acquired in the last 3 to 5 years. One of the latest, Mercury Interactive, was itself already the product of a few acquisitions.

At over $100B in annual revenues, the $2.3B of software reported by HP is unlikely to get much attention from top management. As it stands the HP software product family is loosely concentrated around IT lifecycle management [ITLM] with products like OpenView and the Mercury offerings at the core.

Reading through the full report only makes one thing clear: HP Software Group is a substantial mishmash that lacks even the semblance of a strategy from other hardware manufacturers like IBM and EMC (EMC).

Fortunately for HP investors, the company is doing well in servers, personal computers and the printer business. The risk may be that as the HP software business continues to lag overall growth, management may again go out and look for a billion or two of revenue to bring in house.

If they keep to their circumstantial heritage of ITLM, we would expect them to step up to a Symantec (SYMC), CA (CA) or BMC (BMC) size acquisition to really rock the boat. Otherwise they may nibble at smaller deals in places like storage management to add a few more bits to the mash.

Comments

[RolfFrydenberg]

This article shows a complete lack of understanding of HP's Software strategy. The #1 error is the statement that this area "is unlikely to get much attention from top management". WRONG: It is Mark Hurd who has moved HP's focus - including the focus of HP Labs - to software.

Most of the acquired products that contribute significantly to the 2.3 billion in SW revenues, such as those from Peregrine and Mercury Interactive, are today integrated with "legacy" HP software products such as Operations Manager and Network Node Manager.

Perhaps the most significant problem HP faces today - as they have over the 25+ years I have followed them - is their lack of marketing muscle. Here HP Software should learn from the printer-folks, who have excelled at this for 20 years.

PS: OpenView is not today - or ever has been - a product. From it's very inception in the 80's OpenView was a family of products.

[RichardWebbe]

Who paid you to write this stuff? You have either been living in a hole or have been biased to write such a load of rubbish.
I suppose the aquisition of Opsware at $1.6 Billion was just another whim of HP's even though it will lead the world in IT Servcie and Data Center automation. Sadly someone sent me your article, otherwise I would have never seen or cared about it. But it is poorly researched and needs a bit of work I think. But anyone who works in IT could see that.
The market will not view you well with low value biased articles like thsi so I would say it is you not HP who is on "trial" but is you and your unfoudned , far reaching and ridiculous artilces.
You are a bit of a laughing stock, but that is the internet isn't it.. any one with a computer can write silly things.

[Robert M]

Based on the stunning title of the article, I thought there was actually going to be some explanation of why there is no strategy. Instead, the article clearly "lacks any semlance" of substance on the topic.

Where are the specifics behind the claim of no strategy? Has the author seen a presentation on the strategy and has specific complaints?

The only strategy I could make out from the article was that HP should do more big acquisitions, but then the author is also complaining that making acquisitions leads to a set of incoherent products, so that doesn't make sense even by his own reasoning.

Buying CA, for example, would basically mean HP would have even a larger "mishmash" of products, a large portion of which overlap with HP's existing offerings, many of which are already the #1 or #2 products in their respective categories. And, the author says HP's problem is the pieces "lack coherence", which is the same problem CA would also face, since they are also are made up of products from multiple acquisitions.

[Itanium4life]

I came across this through google and thought it could be interesting but what a waste of space. It appears the author spent 2min. researching this article and then hit "publish". You are right a small amount of revenue is from software but who values a company based on revenue, it is all about current earnings and future potential.

Look deeper in the numbers and you will see a large % of HP's truly sustainable earnings growth (i.e not cutting for efficiencies) came from SOFTWARE. Software there was a joke until recently and there is still more potential to grow earnings on the current base without additional acquisitions.

I really hope you don't get paid for writing this stuff