Hewlett-Packard has big plans to grow its software business for systems and information management, and it plans to get there partly through acquisitions.

HP created a sizeable quake with its $4.5 billion acquisition of Mercury Interactive in November, and last week acquired a tiny company in the Northeast called Bristol Technology. So who will be next?

"We're open to doing software acquisitions like Bristol, or very large-scale, headline-grabbing acquisitions like Mercury," said Tom Hogan, HP senior VP who oversees the company's newly coined HP Software division, in an interview this week. "We have the balance sheet and the cash to do either." What's most important, Hogan says, is that it's the right fit.

A ripe area for acquisition, Hogan said, is software that helps companies manage, archive, and retrieve both structured and unstructured data. "Digitized information is doubling every 18 months," Hogan said, adding that data management is a huge part of the compliance pressures facing companies.

So who plays in this field? Think EMC, IBM's Information On Demand Service, and Symantec. HP had a cash balance of $16 billion at the end of its fiscal year, so while $5 billion-a-year Symantec or $11 billion-a-year EMC seem unlikely targets -- given that HP has barely finished digesting Compaq -- they're not impossibilities. Network Appliance and CA also play in that arena. The rest of the market after that is made up of small vendors.

Any acquisitions in that area would go into the new Business Information Optimization software unit within HP Software, which also contains its new data warehouse software, Neoview.

Meanwhile, OpenView and Mercury software sit in HP Software's Business Technology Optimization unit. HP isn't focused so much on acquisitions to further expand that unit, Hogan said. Still, it's hard to ignore that NCR recently spun off Teradata, potentially setting it up for an acquisition -- by someone.

HP isn't one to back off from big acquisitions. Could there be another big gulp this year? Software growth is a top priority for the company going into 2007, so keep your eyes open.

An in-depth analysis piece on HP's software strategy will appear Saturday in the This Week's Issue section of informationweek.com.