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Doug Henschen
Doug Henschen
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Should HP's Next CEO Buy More Software?

Hewlett-Packard has been missing from key markets. But maybe services and third-party partnerships have been the smart plays.

Can "the infrastructure company" also be a powerhouse in software? Some might encourage Mark Hurd's successor at Hewlett-Packard to flesh out what is now a sparse software portfolio. But it might just make sense to stay the course.

The brouhaha surrounding Hurd's resignation is far from over, with Hewlett-Packard's board now catching flack for what some describe as a weak-kneed, politically correct decision. But Hurd is not coming back, and his successor will have an opportunity to redefine HP strategy. Bob Evans painted the big picture in this column. I'll focus on software related to information management, business intelligence and analytics.

When I think of HP and software, I think of IT systems management, and printer and server management software. A quick scan of the company's Web site also turns up communications and media software I honestly know little about. Those who follow data integration, data warehousing and business intelligence software have long expected HP to acquire vendors in these areas, but the deals have never materialized.

Many thought software would be next after the 2006 acquisition of Knightsbridge, an information management and BI integrator. But as 2007 came and went, HP stood pat as Hyperion, Business Objects and Cognos were acquired by Oracle, SAP and IBM, respectively.

Information integration, data quality and master data management vendors have also been snapped up in recent years. But HP continues to plug software from third-party vendors into its "BI solutions."

Meanwhile, HP's push into high-end data warehousing with the Neoview platform went from white hot in 2007, with major wins at Wal-Mart and Bon-Ton stores, to stone cold in 2008. Neoview was a pet project for Hurd; having joined HP from NCR, the former parent company of Teradata, he knew all about the outsized importance of this category in terms of visibility and strategic decision-making.

Neoview was essentially an attempt to unseat Teradata from the top end of the market. But by the end of 2008, HP reorganized and consolidated Neoview and the former Knightsbridge consultants into the HP Business Intelligence Solutions unit. Hurd put Kristina Robinson, a former NCR protégé and Teradata veteran, in charge, and she quashed all talk of a retreat from BI and Neoview.

To HP's credit, the company's absence from the software side of the business probably hasn't hurt its standing as an information management integrator or hardware partner. In fact, I've come around to believe that HP may be keeping its eye on what matters most, which is potential revenue.

If you examine Gartner's figures on where the big bucks are in information management and BI, only $6 billion comes from BI software each year. The larger opportunities are the $21 billion in data warehousing and the whopping $30 billion in information management and BI implementation services. (HP's EDS acquisition was a grab at the far larger general IT services business, which Datamonitor puts at $600 billion worldwide.)

Free to act as an independent integrator without the taint of selling competing software, HP's BI Solutions unit has strung together a dozen or more partnership announcements over the last two years, including deals with Informatica, Ab Initio, Microstrategy and SAS. Would any of these independents be faring any better had they been acquired by HP? To the contrary, acquisition turmoil might have left them in a worse shape (witness the post-acquisition stumbles of BusinessObjects and Cognos). What's more, HP would be out the hundreds of millions to billions of dollars that would have been required to assemble a complete portfolio of information management and BI software.

Independence also doesn't appear to be hurting HP's hardware business. HP is the partner of choice for both Microsoft and SAP, and plenty of smaller independents know there's nothing to fear in working with the company. IBM seems to get its share of OEM and partner hardware business, too. But independents aren't exactly comfortable about IBM customer contacts and the prospect of Big Blue databases or software somehow entering the mix.

I haven't heard a Neoview customer win announcement in quite a while. But independents including Greenplum, Vertica, Aster Data and others have been growing quite nicely. Just today, Sybase inked a new deal with HP to provide reference hardware configurations for its Sybase IQ analytic database. I'm guessing HP's hardware business will benefit more through partnerships than it ever stood to gain through Neoview even if it was a wild success.

Make no mistake; software is hugely important in terms of customer mindshare and vendor profitability. (IBM learned this first-hand in the early '90s and has since spent more than 10 years buying software companies.) But given the acquisitions already made and the opportunities still on the table, HP could have done much worse than to focus on big deals like EDS and, more recently, Palm.

As Bob Evans uncovered in this article , HP's entry into analytics -- the hottest quarter of the BI market -- will happen through cloud services and mobile devices rather than through conventional software. HP Executive VP Shane Robison says the company's services and mobility investments will help it deliver predictive analytics and data visualization capabilities in new ways.

The analytics vision sounds compelling, but it strikes me as more of a long-range plan than something that's ready to be delivered. That's good, because it will likely be a year or more before a new CEO can articulate what HP can become other than what it is today: A great infrastructure company with a growing services business and little competitive baggage to weigh on partnerships with myriad software companies.

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