HP looks to get its software house in order

After a delayed closing of its US$4.5 billion acquisition of Mercury Interactive, Hewlett-Packard quickly got to work publicly restructuring the company to support its now doubled software division.

Upon the deal's finalization this week, HP announced it had updated the name of its software division to HP Software, stripping out its OpenView brand, and said it would detail a product road map by year-end. The company in July announced its intention to buy Mercury, but in the midst of its board scandals HP had to extend its tender offer four times to Mercury shareholders before it could complete the acquisition.

With Mercury as a wholly owned subsidiary, HP becomes the world's sixth-largest software vendor. HP continues to elevate its software focus from its network management roots up to business technology optimization, which threads IT governance and process management throughout HP's IT management products.

"[Mercury] is a big addition that can't be seen as anything but an extremely significant extension of its software division," says Dennis Drogseth, a vice president at research firm Enterprise Management Associates.

Long criticized for neglecting its OpenView network and systems management products, HP has now with its Mercury -- and earlier PeregrineSystems -- acquisition significantly increased its stake in the enterprise software market. According to HP, the Mercury purchase not only increases the company's potential revenue but also will double the dollars dedicated to management from HP's US$3.5 billion annual R&D budget.

"HP gets a higher level of IT governance reporting and project and resource analysis. HP also gets a service-oriented architecture registry product, [through Mercury's acquisition] of Systinet,which will be really important for governing SOA environments and business processes that will use the SOA services," says Jasmine Noel, a founder and principal analyst with research firm Ptak, Noel & Associates.

Another high point of this deal for HP, Noel says, is "HP becomes the testing market gorilla." For Mercury, the company's past accounting scandals ,which drove executives to resign, "can take a back seat" to HP's own scandals of late, she says.

Still to be determined is how well HP absorbs all of its recent management software acquisitions, which include Peregrine, Novadigm, Consera and Talking Blocks. Among its tasks is dealing with an overlap in the capabilities of OpenView Service Desk and Peregrine's ServiceCenter, which the company plans to address with an upcoming release dubbed Service Manager. Additionally, Mercury in June acquired PowerHelp IT software, a product built from the ground up to be compliant with the Information Technology Infrastructure Library best practices model for service management, from Vertical Solutions and Tefensoft.

"HP now has [configuration management database] technologies from three companies, HP, Peregrine and Mecury, so it will be interesting to see how its Active CMDB strategy changes," Noel adds.

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