HP bids $4.5bn for Mercury for lead in IT center management tools

HP bids $4.5bn for Mercury for lead in IT center management tools

Summary: 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.

TOPICS: Hewlett-Packard

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.
From HP:
<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>

From HP:
<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.

Topic: Hewlett-Packard

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  • HP/Mercury Merger Is Good For SOA

    This is a big move for HP. The points of interest are two-fold:

    1 - from the technology perspective, I see increased convergence of testing, network monitoring and management, and governance. This is much bigger than SOA but a driver is SOA.

    2 ? from a business perspective, I see an industry leader applying pressure to other hardware, application and services providers such as IBM, Oracle, and Dell.

    So what does this mean for management and testing of SOAs specifically? First of all, it's a huge move for HP and securely puts HP at the center of the Systems Management arena for network and now SOA initiatives.

    It also means that the combined HP, Mercury and Systinet solution provides a strong solution for governance, monitoring and testing. This is good news for customers looking to embrace SOA to manage and simplify the complexity in their environments.

    The next step is to see what solutions HP will provide for testing and validation of everything that is happening underneath the SOA or "behind the screens".

    Today?s business processes, that connect companies to customers and suppliers and other third parties, are driven by many applications made to work as a single process through integration and SOA. Without going all the way to the application, middleware, ESB, protocol, and message level, you aren't really testing SOAs as those things support any SOA.

    So it will be interesting to see if HP takes the next step as network monitoring and application testing tools just don't go to this level of testing and introspection (yet).

    In short, we think this news is encouraging for vendors like Solstice Software who enable end to end SOA and integration testing as that is the next frontier in SOA management and control.

    Other interesting points about this acquisition:
    ? Will provide better visibility, productivity, system performance and optimization for SOAs.
    ? Validates the need for management, control and assurance of the systems that drive business.
    ? An early indicator that vendors are looking to be a single source for the total solution.
    ? Confirmation that this is viewed as a growth sector and a tactic that may need to be copied by the other big players who are in the governance/IT management space.

    Feel free to give me a call at 215-416-7631 (cell) or email me to make an appointment to talk.

    Chris Benedetto
    Vice President Marketing, Solstice Software
    • Other companies in play?

      Chris, do you think that the deal places a focus on some other companies that might become acquisition targets? Or was HP opportunistic in scooping up Mercury given its SEC headaches etc?
      • Other HP Targets?

        The acquisition brings HP management tools into the area of application development and testing which will make them more competitive versus IBM and others. They might have paid a bit more than they needed to, but Mercury stockholders are certainly happy!

        If HP wants to go for broke in the utility computing / SOA space - each share the goal of shrinking and compressing the time between application changes and meeting SLAs - then they will still need to round out their portfolio further IMHO.

        Increased valuations for companies with specialties in this space will hopefully drive efficiencies and agility into businesses and push SOA from leading edge to mainstream.

        One example target, Symantec, is mentioned here: