HP's soft option

HP's soft option

ARN: How successful do you think you have been in repositioning the company as services-oriented over the last couple of years?van der Fluit: On one end we're a consumer business where I don't see software playing a key role, expect for putting some intelligence in the devices so that they can communicate and be utilised for Web services. So the major thrust is in the area of infrastructure, where software is playing a critical role as part of the glue. What we are building is a utility computing model, which was only talked about 10 years ago, but is now becoming a reality. It's making more sense of combined server-storage networks in which software is vital. You have seen us working on things such as a utility data centre, which is just one example of how you use software to re-engineer your data centre to allow a lot more flexibility in dynamically re-architecturing your resources. To be successful in the solutions-driven market, you need to stop selling individual commoditised components, because it doesn't let you sell end-to-end solutions - value-add does that in the form of software and services. So, to answer your question, yes, we have made progress, but it's still early days.

Has the HP brand been detrimental to this process?

When you look at what people associate with HP - printers and computers - that hasn't helped us in terms of software visibility. The OpenView brand, which is often seen as an independent brand, has helped us. However, playing out the HP brand to leverage the fact that we're a global, prosperous company would help us, but we haven't played it out to the extent where the market would understand that software is a key element of our positioning.

Last year you made $US2 billion from the software solutions side of the business, which represented roughly 5 per cent of your total revenue. You've also claimed double-digit growth in your SSO arm for the last few quarters, which has seen you become one of the top 10 software vendors in the world. Your ambition is to become the number one or number two software vendor. How realistic are these expectations, especially in light of the impending HP/Compaq merger?

In the short term, it's going to be hard to significantly increase this growth because of the Compaq acquisition. In the long term, you will see it go up again once we have integrated Compaq and HP. We have very strong services and support and hardware arms, and we also have good software, although I think our software needs to scale more. The opportunity for us is to enter Compaq's ecosystem, as they basically don't have any systems management software or middleware, and the merger would give us access to their customer base and a bigger sales force to serve that base. I can't tell you what our revenue targets are, but our software solutions division needs to maintain double-digit growth.

As a software company, we are clearly making our mark in specific areas. OpenView, for example, is taking share from the likes of Tivoli and CA, but we haven't taken share in the middleware space. Bluestone, which we acquired to serve this space, was a company that was successful selling to dotcoms. Clearly, that market has disappeared and the reason we bought them was because we wanted to go to the enterprise.

To achieve the number one or two position in the market, you said you need to have 75 per cent of your revenue coming from licensing, but you've criticised CA for doing exactly that - saying it was guilty of selling licences that are not being utilised. Can you avoid falling into the same trap?

You need to hit about 65 to 70 per cent of your revenues through licensing, the rest comes from services. CA works with a more extreme model of licensing where it doesn't have many services to support its software. On the other hand, if you go 80 or 90 per cent services, you typically get as much money out of one single project and you get your partners excited about it. What we are implementing is the ASP business model, which we introduced back in 1990 and which has been copied by others - a very strong business model which requires strong service and support arms and a strong partner network, and that's what we need to focus on.

How has this push into services affected your partnering strategies - the skill set and the profile of partners you need to engage, as well as the type of training and support you need to provide them with in order to achieve your goals?

We are pushing more towards solution selling, so systems integrators are, for example, becoming a lot more important to us. We're also looking for value-added resellers to attack vertical markets. However, the important thing is to have a selected pool of strong partners that can help that push. The other element of our partner strategy is the OEM channel, we're going to really focus on that with our software business. Frankly, I think that's been a missed opportunity for us across the portfolio and over the last 12 months, since we started focusing on it with OpenView, we've been growing that business by 200 per cent. Middleware is another key OEM opportunity. Then there is managed service providers as a new channel for which we have announced a new program. For all of them, we have a good certification program.

Given that you want to improve HP's partner-generated revenue stream in Asia-Pacific, are there any areas where you're actively recruiting resellers?

The key areas of recruitment are the middleware space where we're looking for focused ISVs, OEMs and system integrators. In the OpenCall space we see a need for ISVs. Customers, like service providers, may build their own services that makes them unique in relation to their competitors, but it's important for them to have a total portfolio, which is where I see an opportunity popping up for software developers on the OpenCall side of things. In terms of OpenView, there is an ongoing initiative to get more ISV applications to market.

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