Software is HP's 'fastest growing' unit

IT giant's software arm is worth US$3 billion in 2008, compared to US$1 billion in 2005, but HP remains cautious on cloud strategy, say company execs.
Written by Eileen Yu, Senior Contributing Editor

VIENNA, AUSTRIA--Software has turned into a multi-billion dollar business for Hewlett-Packard, becoming its fastest-growing and most profitable unit following several acquisitions the company inked in this space over the last two years. But, HP remains coy on going big with a cloud computing strategy, which company executives say will not be a cure-all solution for businesses.

Once a loss-making business for HP, software clocked US$3 billion in revenue and US$462 million in operating profit for the company's 2008 fiscal year, ended Oct. 31. In 2005, this business division had bled US$49 million in losses and generated just US$1.06 billion in revenue.

HP refreshes BTO products

HP on Tuesday unveiled new releases for its business technology optimization (BTO) software offerings, Quality Center (QC)--inherited from its Mercury acquisition--and Universal Configuration Management Database (UCMDB).
The new QC 10.0 is a more integrated and cohesive software suite to help businesses better manage the complete lifecycle of their application delivery process, said Mark Sarbiewski, HP Software's senior director of products. He said the enhanced release encompasses requirements and test management, functional and security testing, and enables users to share and reuse assets--and best practices methodology--across projects.
The new UCMDB 8.0 integrates HP's Business Service Management software modules to provide the ability for "closed loop incident management", said Ramin Sayar, HP's senior director of products, allowing users to prioritize events such as systems failure and service downtime, based on their impact to the business. This, Sayar said, can help improve problem resolution, mitigate risks and reduce costs.

In fact, software has been the IT giant's fastest-growing and most profitable business over the last couple of years, Tom Hogan, senior vice president of HP's software division, said Tuesday during his keynote here at Software Universe, the company's annual conference and exhibition for customers and partners.

HP attributed much of this growth to the various acquisitions it made in the software space in the last three years, totaling almost US$7 billion, which included Opsware in 2007, Mercury Interactive in 2006 and Peregrine Systems in 2005.

Coupled with its acquisitions in the services realm, notably the mega multi-billion dollar deal with EDS earlier this year, Hogan said HP offers a strong value proposition with its ability to deliver both software and services as an integrated offering.

To this end, he revealed that HP will be rebranding its software unit as "HP Software and Solutions" to encompass the company's services portfolio. He said HP will continue to expand its footprint in these two segments, investing US$500 million annually on research and development work in software and services.

Hogan added that the company, with the EDS acquisition, is well-placed to play in the cloud computing realm, but said it is choosing instead to adopt a more cautious approach.

Cloud "not a panacea"
He revealed that the company has been "very deliberate" over the last nine months in assessing the impact of cloud. While it believes cloud computing represents "a real paradigm shift" and that there are compelling reasons to deploy services over the cloud, HP concluded that the technology "will not be a panacea" for businesses, he said.

Ultimately, Hogan added, a multi-channel strategy for service delivery will emerge, where enterprises will choose to have their applications hosted on-site, outsourced or delivered over the Web.

"Given the work that we've done in the last nine months, I think you will see HP taking a much more visible position [on a cloud strategy] in the industry in the coming months," he said.

Darryl Dickens, HP Software's head of marketing for Asia-Pacific, said: "HP hasn't been prolific in making big statements about cloud [because] we want to build something credible and not built around hype.

"If you think about the parts that play in cloud, HP [already] has a lot under the hood," he said, noting that the company's newly-released Quality Center 10 software, for instance, has the ability to monitor and provide visibility of the application infrastructure and delivery process.

Eileen Yu of ZDNet Asia reported from HP Software Universe in Vienna, Austria.

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