HP: Lesser-Known Assets Fuel Growth

Hewlett-Packard’s story is more than selling big servers, advanced storage systems and just about any kind of printer you can imagine.

Take its software business: it generates over a billion a year in revenue. HP Financial Services is also one of the largest financing organizations in the world?

Or how about that stuffy old Unix business? HP has a healthy share, along with IBM and Sun of what’s estimated to be a $16 to $18 billion market worldwide.

In an exclusive interview with internetnews.com, HP executives talked up the less-publicized sides of HP’s business, the state of the company, and how it plans to compete for a larger slice of the enterprise computing market.

“We don’t want to be a box provider, what we bring to the table is value-add and choice,” said Mark Hudson, vice president of marketing for HP Enterprise Storage & Software. “Our customers range from small up to Fortune 50 companies, and we can scale up or scale down depending on their needs, whether it?s a choice of processor, like AMD or Intel systems or up to Itanium and a 128 CPU Superdome system running multiple operating systems.”

Hudson said HP’s decision to add servers based on AMD’s 64-bit Opteron processors to its mix of Intel-based systems has helped keep HP near the top of server providers and been a boost to revenue. “For example, with Opteron, we’re selling a lot of four-way servers, which is a richer environment than the traditional x86 space [i.e. Intel]. And when you have more CPUs, that generally leads to more sales of memory and disk storage,” he said.

HP’s software effort is largely designed to enhance the value of the hardware it sells. It starts with the array of management software HP offers under the OpenView brand. “We’ve been in the business of managing networks and servers for over twenty years,” said David Gee, worldwide director of marketing for HP’s management software business. “The idea is to provide our customers with answers to some basic, though critical questions: What do I have? Where is it? Is it working?”

Martin Reynolds, vice president and analyst with Gartner, told internetnews.com that “companies spend a lot of money on hardware and systems, but you need new tools and software to handle all that. HP’s adaptive enterprise starts us down that path.”

Reynolds noted that, despite its size, HP’s software business represents a small fraction of the $80 billion company’s overall revenue. “But the key thing for HP software is a leverage that helps it sell more hardware. They’re also doing some cutting-edge stuff like utility computing that there isn’t much of a market for now, but it’s going to happen and be very important.”

Earlier this month, HP added to its OpenView arsenal, agreeing to purchase IT management specialist Peregrine Systems for $425 million in cash. Peregrine makes applications for tracking IT assets, expense controls, process automation, and service control and alignment, among other things.

The deal should make HP a more formidable foe against rivals IBM and Computer Associates , leading makers of management software. Altiris , Provance and MRO compete in the second tier.

“We filled a big hole in our OpenView portfolio with Peregrine,” said Gee. And he added that OpenView’s reach has expanded from three or four years ago, when its primary function extended to management of infrastructure, service and storage.

“If you want to know what’s going on in IT, you also need an ability to understand what applications you have, what they do and what you get out of all that,” said Gee.

He used banks as an example. A bank may have an extensive network of technology to enable online banking, including application management, database and a Web layer to deliver results to a browser, but he said HP has met with banks that don’t have a good ability to monitor how long it takes customers to perform transactions.

Tracking Dead Employees

Or how about this infrastructure problem? Gee said studies have shown that 18 percent of help desk calls are related to getting a password reset. HP’s OpenView Select Identity is designed to automate and simplify password reset. OpenView software tackles a number of larger issues, such as who manages all this information, setting up a new employee, and which specific employees have access to various layers of company information. Such security and management solutions are far from unique to HP, though Gee claimed the company is doing cutting -edge work in the area.

“The management of identity is a really big deal,” said Gee. “Just ask any CIO how many dead employees he has!” HP’s research shows that in a company with 10,000 or more employees, there may be as many as 1 to 2 percent who have died yet still have access to e-mail and other resources. It all goes back to identity management and being able to track what’s going on throughout the enterprise.

Another area of focus is integration. Since most of HP’s customers have mixed environments of different servers and hardware purchased over many years, it’s not efficient to manage them all separately. “We want to be able to offer the same tool and have it not just be reactive but proactively manage things, and tie it all back to the automation part,” said Hudson.

HP also is making a strong push in the area of “availability,” making sure its systems keep working. Part of HP’s effort here is similar to the vast consulting services of competitor IBM: Both offer a portfolio of pre- and post-sales and support services. Hudson points to such customer wins as 19 of the top twenty stock exchanges in the world running on HP’s NonStop systems.

You may not be in the market for a multi-million NonStop system, but HP Financial Services helps with the purchase of a broad range of systems. The HP wholly owned subsidiary has more than $8 billion in assets and employees in 51 countries.

And what about Unix? Even as its support of Windows, Linux and open source grows, HP sees the stalwart operating system as a key asset well into the future. Currently it’s on a roll, with six consecutive quarters of year-over-year growth.

“First of all, Unix is a big market, for HP and the other big players, IBM and Sun,” said Hudson. “Second, Unix has a large drive effect. For every dollar of Unix server we sell, we also sell another two dollars in support software, financing and other add-ons.”

Analyst Reynolds agreed it’s a fine business, but he said HP could be doing better. “HP’s sales of large Unix servers aren’t where they should be, it should be a hugely profitable business, ” said Reynolds. “But it’s moving in the right direction. And overall. a lot of the restructuring [CEO Mark Hurd has] implemented looks like it’s working.” Please enter your content here.

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