Governance Vendor, Merge Thyself

It’s pretty hard to keep secrets these days. After months of speculation, HP put Mercury out of its misery, announcing it would acquire the scandal-rocked firm for roughly a 25% premium on its most recent closing price. It wasn’t a bad deal for Mercury shareholders, as HP’s offer amounted to roughly double the street value of the firm after it announced the firing of its three top executives over allegations of stock option gaming last fall.

On one level, the acquisition of Mercury adds a sad footnote to a company whose reputation wasn’t brought down by performance, but by allegations of executive greed.

On another level, it adds another feather in the cap for HP, whose OpenView business has recently been on a roll (its Q1 numbers were 34% higher than those of a year ago).

It’s easy in hindsight to realize that Mercury’s governance strategy ultimately had to play on a wider field that included IT operations. Increasingly, the company was finding itself competing, not with the Compuwares of the world, but the BMCs, CAs, and IBMs.

Having begun life as a software testing vendor that played heavily in the application development space, Mercury shifted gears roughly three years ago when it bought project portfolio management provider Kintana. The shift higher up the totem pole to IT governance made sense in that it widened Mercury’s horizons from software QA to IT QA.

Even had Mercury’s corporate governance scandal never occurred, it would have found its IT governance hitting the wall sooner or later. Take service desk. Just over a month ago, it acquired a small firm that provided a service desk (what used to be called help desk) tool that it billed as being driven by ITIL (IT Infrastructure Libraries).

To clarify, ITIL is becoming a more popular term among CIOs because it provides a framework of best practices for delivering and managing IT service. ITIL has grown in importance, not only because IT organizations need to document their quality of service, but also because many of the ITIL processes, such as change management, have compliance ramifications.

While Mercury’s ITIL-based service desk approach was a natural extension to its IT governance offerings, it proved an incomplete solution. By contrast, most service desk offerings are linked to IT operations systems such as BMC Patrol, CA Unicenter, HP OpenView, or IBM Tivoli. But Mercury’s was linked to a change management system, an approach that it claimed was more business-focused. Yet, offering a service desk lacking provision for automatic generation of trouble tickets when an IT operations system reports an outage does little for meeting service level agreements.

Consequently, it wasn’t surprising that HP was the rumored suitor for Mercury. While HP – like its IT operations rivals – has promoted the business aspects of systems management, it lacked the IT governance dashboards, product portfolio management, and analytics of CA and IBM. Mercury therefore makes a good fit.

But we have one quibble with published analyst comments that HP’s acquisition of Mercury adds SOA management. Aside from the acquisition of web services registry provider Systinet that was completed earlier this year, Mercury had not yet developed solutions or strategies for run time governance of SOA environments. Ironically, that’s something that the HP acquisition could solve. HP’s SOA Manager, which provides the run time governance, has until now been somewhat of an orphan in the HP software group. Paired with Mercury’s Systinet, HP might finally get the chance to plug the gap.