HP Buys Opsware – Or is it the other way around?

HP’s announcement that it plans to buy Opsware represents something of a changing of the guard. HP’s $1.6 billion offer, roughly a 35% premium over last week’s close, is for a $100 million company whose claim to fame is managing change across servers, networks, and recently, storage.

Today, Opsware’s change automation systems tend to work alongside classic infrastructure management tools, such as what used to be known as HP OpenView. Over the past year, Opsware has bulked itself up with several acquisitions of its own, including IT process automation – where you embed data center best practices as configurable, repeatable, policy-driven workflows. And it has added storage management, plus a sweetheart deal with Cisco for OEM’ing and reselling its network change management system as part of the Cisco. Although Cisco wasn’t happy about the disclosure, Opsware did announce during the Q4 earnings call that Cisco had resold $5 million worth of its network automation tool.

For HP, the Opsware acquisition comes after a year of roughly 80% growth – although the bulk of that was attributable to the Mercury acquisition. HP Software is one of those units that HP somehow never got around to killing – although not for lack of trying (we recall HP’s server unit concluding a deal with CA that undercut its own HP OpenView offering). And it reported an operating profit of 8.5% — although not stellar, at least it reflected the fact that software is finally becoming a viable business at HP.

In part it’s attributable to the fact that infrastructure management folks are finally getting some respect with the popularity of ITIL – that is, ITIL defines something that even a c-level executive could understand. The challenge of course is that most classic infrastructure management tools simply populated consoles with cryptic metrics and nuisance alarms, not to mention the fact that at heart they were very primitive toolkits that took lots of care and custom assembly to put together. They didn’t put together the big picture that ITIL demanded regarding quantifying service level agreement compliance, as opposed to network node operation.

What’s changed at HP Software is that the Mercury deal represented something of a reverse acquisition, as key Mercury software executives (at least, the ones who weren’t canned and indicted) are now largely driving HP Software’s product and go to market strategy. Although branding’s only skin deep, it’s nonetheless significant that HP ditched its venerable OpenView brand in favor of Mercury’s Business Technology Optimization.

Consequently, we think there’s potentially some very compelling synergies between Opsware’s change management, HP’s Service Management and CMDB, and Mercury’s quality centers that not only test software and manage defects, but provide tools for evaluating software and project portfolios. We’re probably dreaming here, but it would be really cool if somehow we could correlate the cost of a software defect, not only on the project at large (and whether it and other defects place that project at risk), but correlate it to changes in IT infrastructure configurations and service levels. The same would go for managing service levels in SOA, where HP/Mercury is playing catch-up to AmberPoint and SOA Software.

This is all very blue sky. Putting all these pieces together requires more than just a blending of product architecture, but also the ability to address IT operations, software development, and the business. Once the deal closes, HP Software’s got it work cut out.

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