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Analysis

HP looking to build on Mercury's SaaS offerings in IT management
Martin Banks By: Martin Banks, Associate Analyst - Datacentre & Mainframe, Bloor Research
Published: 16th November 2007
Copyright Bloor Research © 2007
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As demonstrated by both Saleforce.com with CRM and NetSuite with core business management systems, targeting important but definable slices of what constitutes a business is the current successful strategy that should be adopted by companies looking to offer Software as a Service (SaaS) as an option for service delivery. It is certainly a tactic being followed by HP. Indeed, through its acquisition of Mercury it would claim to be a pioneer in SaaS delivery with a seven-year track record behind it.

HP has considerable interest in the future development and deployment of both SOA and SaaS, and its Research Laboratories are already looking many years into the future of these operational concepts and technologies. Long term, it is quite possible the company could become a serious player in the service aggregation marketplace. But in the here and now it is concentrating on an important but definable slice of SaaS business bequeathed it as part of the Mercury acquisition—IT infrastructure and service delivery management.

The main items in the portfolio are Project and Portfolio Management, Functional Testing and Production Monitoring. All are important components in IT infrastructure management, and HP's vice president-SaaS, Marc Olesen, readily admitted that he sees his primary job as attracting the interest and buy-in of company CIOs. In his view, businesses can no longer run without IT, so IT is increasingly the business and making it run with a better outcome is the important objective.

Included in his list of better outcomes are an accelerated time to value—typically down to three weeks—coupled with the chance to unburden resources and move responsibility for the performance of the system to the service supplier. It is also offering the flexibility to allow users to select how much of the service they wish to utilise. The SaaS offering is just a service delivery option alongside the more traditional licence/acquisition approach. According to Olesen, many users are mixing SaaS and in-house services depending on where they are on their particular investment/application lifecycle.

As well as targeting existing HP/Mercury customers running these tools in-house, HP is also looking for new customers. These include users of other service management systems such as IBM's Tivoli. There are already customers integrating Tivoli with the SaaS-delivered tools. The SaaS operation also works directly with customers, as well as through partners or as an integral part of HP's own outsourcing services.

One slightly different component in HP's SaaS, which in practice is driven by the type of market sector it is targeting, is that customers are encouraged to use what they have paid for rather than paying for what they use. At first sight this would seem to mimic the old market penetration numbers' tactic of selling application suites, where most of the constituent applications then sat on shelves unused. The suites were normally purchased to obtain the one application the user actually required. The remainder, however, were counted as individual applications sold and at least one popular application lost its market leadership position (in terms of actual usage) on just such a basis.

Could the sales team have the temptation to up-sell customers? According to Olesen the tactic is complementary and is not about selling them more than they need. The customer determines the footprint of what they want—for example in the number of users or number of transactions to be processed. This determines the level of service they want to purchase. HP's primary role is then to make sure the customers are taking advantage of what they bought and have the right level of expertise to take advantage of it. There is still a strong need for HP to assign resources—people, primarily—to support individual customers and provide services such as mentoring and expert support when required.

There are currently 670 customers and the current prediction is for a 30 percent annual growth rate. As HP is also hosting the service it does find itself in the position of selling its servers to itself, and then getting a higher margin on them over the lifecycle of service provision than would be possible from a traditional sale. Olesen was reluctant to talk in detail about financials, but did say that the SaaS operations team is very closely integrated with HP's R&D efforts.

The SaaS operation is aiming at the same catchment area of existing HP software efforts—infrastructure and service delivery management—rather than spreading out into other areas. It is another delivery option for its focus on IT management tools and applications.

The tools available through SaaS will be expanded at some time in the future by the addition of a Service Desk. The company is also looking at SOA Governance using the tools HP acquired with Systinet, security tools from the Spy Dynamics acquisition and datacentre automation from the OpsWare acquisition.

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Published by: IT Analysis Communications Ltd.
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