Hewlett-Packard's $4.5bn bid to acquire Mercury Interactive is a smart move as the top IT vendors jostle for prime position in the area of data center management.
The ultimate goal is to create a type of operating system for the IT data center of the future in which applications can be provisioned in near real-time and performance loads can spread across many different resources. This is part of a meta-level approach to combining business processes with IT in what is called Business Optimization Software (BTO). And to do that, IT managers need to know the performance of their applications and the rest of their systems--Mercury Interactive provides part of that solution.
HP's OpenView software is already one of the leading applications for managing IT resources and the Mercury products will strengthen that product line.
<blockquote>The transaction brings together the strength of HP OpenView systems, network and IT service management software with Mercury’s strength in application management, application delivery, IT governance and service-oriented architecture governance.</blockquote>
<blockquote>The Mercury acquisition is expected to increase the size of the HP Software business to more than $2 billion in annual revenue. Immediately following the close of the transaction, Mercury will become part of the HP Software business and both companies’sales forces will begin reference-selling each others’ products.</blockquote>
However, HP's past performance of its software group has been rocky. Over the past few years, the company failed in its bid to establish a large middleware business through acquisitions and organic growth to rival BEA Systems, and IBM. In 2000, HP acquired Bluestone in 2000 as part of that push but was unable to capitalise on that investment.
If it can overcome the complexity of integrating a large business into its operations, building up its software business is a good move because of the sharply higher operating margins from software than from hardware. The addition of Mercury's product line should also boost HP's Services group as it competes against its largest rival IBM.
HP however, needs to unravel some of the mess that Mercury got itself into in recent years with the SEC and make sure that there aren't any hidden problems.