10 signs HP is serious about software

HP this week at Software Universe offered details about how it plans to build out its software and services business. Here are 10 things we learned that show us HP is serious about software.

1. Chairman and CEO Mark Hurd told the more than 2,600 attendees that HP invests nearly US$4 billion in R&D spending annually, 70 per cent of which he reported "was spent on some sort of software, in the area of US$2.8 billion to $3 billion."

"To be the best software maker in the world, it is important we have the best software business in each category, not just market share," Hurd told attendees.

2. HP overall "broke the $100 billion revenue mark"; and its software business unit, though small in comparison to its hardware business, went from "marginally profitable" -- a few years ago it represented less than 1 per cent of HP's revenue -- to the fastest growing business within HP, with 3,500 employees. The company reported US$2 billion in software revenue in the past, and today, industry estimates show software is garnering closer to US$3 billion in revenue, HP said.

3. HP this week inked a deal with hypervisor market leader VMware designed to help HP management-software better manage and optimize virtual-server environments. Industry watchers called the deal a first of its kind among the Big Four management vendors, and anticipate that virtual systems management -- today a nascent market -- will be a game-changing technology in the future.

"This deal is hot and it's the first of its kind that involves a major management vendor doing R&D and development work with VMware," says Evelyn Hubbert, a senior analyst with Forrester Research. "They need to deliver a product road map to prove there is substance behind this partnership."

4. The company built its software business in large part on such acquisitions as the US$4.5 billion Mercury Interactive buy and the US$1.6 billion Opsware purchase. In addition to that, HP's software acquisitions range from Peregrine Systems in 2005 to Tower Software in May 2008. Still, HP contends it's not depending on M&A to build out its software business. In fact, Tom Hogan, senior vice president for HP Software, said the vendor already earmarked more than US$400 million to spend on organic R&D within the software business unit.

"We are not dependent on M&A for innovation at HP," Hogan said. "We are driving a healthy mix of internal R&D and M&A. We don't want to just assemble companies and give you a bag of parts."

5. HP detailed integration work that shows the vendor is invested in making its software easier to use.

"HP showed us integration among its products that reflect logical and business purposes, such as integrating its change-management software into problem-resolution tools and configuration capabilities into release-control tools," Hubbert said. "These integrations help service delivery and solve business problems."

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