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Mercury a Measure For HP Software Position

Analysis: Should HP succeed in its bid to purchase Mercury Interactive for $4.5 billion, the venerable computer maker would succeed in landing on the software market map, analysts said.

Mercury will add application management, application delivery and IT governance software to HP's OpenView line of server, network and IT service management software.

This means HP will be able to sell software to help companies test and manage their own software.

These are crucial steps in the application process because they allow businesses to automate mundane testing and quality-assurance acts normally reserved for IT staffs. Automating the process can reduce errors associated with human intervention.

HP also gets a bit of a two-for-one with the purchase.

Earlier this year, Mercury bought service-oriented architecture (SOA) management provider Systinet, which also provides a services registry and repository and policy management.

"Whereas before they primarily had capabilities once applications were deployed, with Mercury and Systinet under their belt they can credibly approach the design, test, and deployment phases of the lifecycle and not just deployment and management," said ZapThink analyst Ronald Schmelzer.

"HP is really ready to tackle the whole picture of the service lifecycle."

Rivals IBM , CA  and BMC Software  all have some of the capabilities at this point, but nothing so comprehensive as HP's Mercury buy, which will make what HP CEO and President Mark Hurd called a "software powerhouse."

Not only will the buy help HP  ostensibly double its software revenues to $2 billion, but it will help the company capitalize on what Hurd said has been a trend in the enterprise computing industry.

Hurd, whose boldness stock when up a few notches with the announcement, said that trend includes virtualization of server capacity, virtualization of storage, where people are trying to connect heterogeneous products together.

To do this concept justice, companies need adequate management tools.

"Our vision is a world made up of lots of heterogeneous building blocks, but all managed together with an extensive portfolio of capabilities," Hurd said.

"We think we can form together almost a management software ERP capability for the market."

And by doing so, give competitors such as IBM, CA and BMC a run for their money.

"I think it puts them on solid competitive footing, and it should cause BMC and CA and IBM to pause," said Gartner analyst Kris Brittain, noting that there are no vendors at the scale and scope of Mercury for HP's rivals to acquire.

Brittain said the deal allows HP to do something that those vendors have been talking about but really have not been able to execute because they have small piece parts.

"It's providing what I'll call this 'governance umbrella,' helping connect the business to IT," Brittain said.

HP is essentially saying we're going to do a better job of managing IT and connecting the dots to business."

This is no small feat for a company that took heavy fire for a software strategy some industry experts discounted as amorphous.

"In the past when you thought of HP, did you think of software?" asked Brittain. "Absolutely nobody did."

Brittain said there have been numerous rumors in the past decade that HP would divest its software business. In one fell swoop, Hurd and Co. have managed to dash those musings.

The analyst noted that HP's acquisition of Peregrine Systems for $425 million was a good start, putting the industry on notice that HP wasn't going to exit the software market.

Acquiring Mercury should quell any further speculation.

As for the 33 percent premium HP is paying, a boost that left many industry watchers scratching their heads, Brittain said this will not be a problem if HP executes well.