When Mark Hurd took the role of CEO at Hewlett-Packard (HP) in April 2005, following Carly Fiorina's removal, he was heralded as an operations expert, someone that could make good on the visions his predecessor had set out, but notably failed to deliver on.
One of these goals – to make HP's software division profitable – was achieved in the quarter ending 31 October 2005, largely thanks to sales of its OpenView systems management software which were up 16% year-on-year. Overall the software division reported profits of £27 million on sales of $311 million, up from a $7 million loss in the year-ago quarter.
OpenView has become the cornerstone of HP's software plans, but its turnaround owes a great deal to acquisitions and no small amount of introspection. "After Hurd came in, the software business was reviewed three times in two months," says Todd DeLaughter, VP and general manager of HP OpenView. "It was just losing too much money."
Those reviews also preceded the unexpected departure of Nora Denzel, the former general manager of HP's global software unit; she left just days before HP's Software Universe conference, held in Nice in December 2005.
Aside from the managerial changes, Hurd has also overseen a modest acquisition spree which has not only helped improve revenues, but filled in some of the gaps in the OpenView suite. The most recent, that of federated identity management vendor Trustgenix, for example, bolsters OpenView's access control – an area that has gained significant interest from systems management vendors recently.
However, it is the acquisition of asset management software maker Peregrine that is seen by market watchers as the key acquisition. The deal closed in December 2005. As Forrester Research analyst Thomas Mendel notes, roughly 75% of Peregrine's customers currently use IBM's Tivoli system management software; HP now has access to that install base, and the potential to unseat IBM in some parts.
But in paying $425 million in cash for a beleaguered company, HP must now demonstrate it can execute on both integrating the technology with its existing software and ensuring it can deliver compelling reasons for customers to invest in its entire OpenView suite. "[We] have to get full value from the acquisition, which we haven't always been that good at doing in the past. It's about accessing markets – we want to sell Asset Centre to every customer we have in Europe," says Andy Isherwood, general manager for HP software in Europe, the Middle East and Africa.
Ultimately HP is promising its management software, combining virtualisation and automation technologies, will facilitate largescale cost reductions within the corporate data centre. HP executives argue that, in future the company's system management software will allow one technician to manage up to 200 servers; they put the current technician-server ratio at around 1:20.
In the long term, though, HP still has to convince some sceptics that it has a coherent software strategy. Analysts at the Enterprise Management Associates warn: "The very flexibility it offers customers is matched by a still confusing array of products and product options that are shipped with varying degrees of integration."