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HP Software turns to mediums for market expansion

IT giant discovers a world of smaller firms

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Hewlett Packard's software division has realised the world is full of medium-sized enterprises and launched a new sales program and range of "lite" management apps at the market that was there all the time.

The vendor unveiled its ten.to.one strategy at a partner conference in Berlin this week. The number refers to the size of the companies the software division has begun targeting - those with one thousand to ten thousand employees.

The ten.to.one strategy will include a reconfiguring of HP Software's product line-up into what the firm described as a "BTO lite portfolio". It will also see an overhaul of its sales and channel as it believes such firms prefer to deal with partners that with HP direct.

The first product aimed at smaller businesses will be Loadrunner, a performance testing tool which will be offered as a cloud service on Amazon's EC2 platform. Just to show how funky the operation is, it is being classed as a beta product, just like Google.

Jonathan Martin, HP's vice president and general manager for Commercial Solutions and Information management, characterised such firms as having a "swivel chair approach" to managing technology, with IT staff having to carry out multiple functions.

At the same time, he said, their IT tended to be more integrated with the business and its objectives, as they hadn't succumbed to the silo-itis common in larger enterprises.

Martin said such firms had yet to graduate to the sort of infrastructure management products and services HP Software push, and were typically using the point management tools that came in the box with the kit or software they were running.

"The goal is to become the number one is this segment as we are in large enterprises in the next three years," said Martin.

Martin said the medium enterprise market represented a $7bn opportunity, with 24,000 companies that HP will be looking to turn on to its software.

Which makes one wonder why HP - in common with its rivals to be fair - has not really paid it more attention in the past. The vendor is clearly under pressure to do something to reinvigorate its software operation.

The business has been created over the last five years through a series of acquisitions, including Mercury, Opsware and Peregrine. These have been bolted onto the vendor's longstanding OpenView operation.

However, while the firm has been able to build out a product range, turning that into a bona fide money growth machine has been trickier. In Q2 results unveiled this week, HP Software had $871m in sales, down a percentage point, though the business technology optimization products (mostly OpenView, Mercury, and Opsware products) were up 2.8 per cent, to $584m. Operating profits were $162m, up a few points from a year ago. In Q1, software sales were flat, with BTO down a point.

Martin argued that to date, the operation had been preoccupied with integrating the acquired businesses, which had left it with a host of channel strategies and partners. It's no coincidence that the medium enterprise strategy, which will largely rely on partners rather than direct sales, has been put in place as the economy threatens to lift IT spending out of the doldrums.

Martin said he expected a typical first transaction with a medium enterprise to be in the region of $10,000 to $20,000, and to be sealed in 45 to 60 days. While this would be substantially smaller than HP would expect from enterprise customers, the cost of sale would also be substantially smaller, with product being demonstrated over the internet and the sale conducted over the phone. And there would be masses more transactions that would be possible in the enterprise space.

Other new lines aimed at mediums include HP SiteScope Operation Managers for the management of server and virtual environments, and HP DataProtector for Microsoft Hyper-V. The firm had previously targeted VMWare.

The extension to Microsoft's virtualisation platform could be seen as a recognition that HP could potentially be butting heads with Redmond as it tries to penetrate this market.

Martin said that while the products unveiled this week represented a cherry-picking of its existing line, there was plenty of innovation coming down the pipe. The ex-Salesforce exec said he was seeing the same level of energy amongst HP's development teams as he had previously seen at the SaaS pioneer. The initial focus this year would be financial management and virtualisation. ®

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