HP's bold purchase of Mercury ups the SOA governance ante

Summary:HP's record on absorbing large acquisitions well and quickly is not stellar. So how well HP manages the Mercury integration process will be a key indicator of how well CEO Mark Hurd is transforming HP.

Governance is to SOA what systems management is to datacenters. So it makes perfect sense for HP to buy Mercury Interactive: HP gets a strong Silicon Valley company at a good price, it quickly strengthens its role in the SOA governance market, and it broadens its core systems management value into application lifecycle management.


This bold move allows HP to both strengthen its systems management hand -- by being able to quickly apply Mercury's core BTO products to a complete application lifecycle/management role (from requirements planning to applications sunset) -- and also jettisons HP into a SOA governance leadership position.

HP, with Mercury under its wing, can now have an even better story on helping enterprises reduce their total cost of applications, services, and infrastructure ownership -- before, during, and after applications are in full production. A further benefit could be created once HP can tie together what happens to applications and services in full production with what takes place in an application's upgrade or patch path. The efficiency prospect of ease-of-feedback-loop for complex applications in terms of use, development, and refinement is enormous.

The SOA governance strength comes directly from Mercury's purchase of Systinet in January. Mercury's own bold move with Systinent probably made this HP deal possible, and resurrects Mercury from a disadvantaged position as a underappreciated vendor and over-the-counter traded stock following its delisting from Nasdaq last year.

Indeed, the HP acquisition is a great outcome for Mercury, which was one of the first companies to get pinched for stock options timing shenanigans, and took a very hard penalty for what now seems less exceptionally bad behavior than it did last year. Some 60 companies are under investigation for similar practices.

It will be most interesting to see what HP does to bring general governance of IT (and corporation or portfolio?) together. This is a very large issue, involving organizational management, culture, methods, IT transformation, and, of course, technology. HP has as good a shot as anyone to join the various definitions of governance now circulating into a comprehensive whole.

HP has done a very good acquisition. However, HP's record on absorbing large acquisitions well and quickly is not stellar. So how well HP manages the Mercury integration process will be a key indicator of how well CEO Mark Hurd is transforming HP.

This is not so good news for Borland, which has been working toward an application lifecycle management (ALM) leadership position. It further places HP and IBM at direct odds on more fronts, now in SOA and datacenter management, as well as ALM. Microsoft's own moves into ALM may also feel the heat from the HP-Mercury match-up.

A further interesting sidebar to this story is whether the stock options timing scandal will -- the law of unintended consequences at work -- provoke more mergers and acquisitions, or even takeovers. If companies caught up in the scandal see their valuations drop (or worse), will that make the company especially seductive to would-be mates? When the phone rings, is it the SEC or your new daddy?

Full disclosure: HP is a sponsor of my BriefingsdDirect podcasts.

Topics: Hewlett-Packard


Dana Gardner is president and principal analyst at Interarbor Solutions, an enterprise IT analysis, market research, and consulting firm. Gardner, a leading identifier of software and cloud productivity trends and new IT business growth opportunities, honed his skills and refined his insights as an industry analyst, pundit, and news edito... Full Bio

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