I just got the chance to hear the details on HP Software's intention to acquire Opsware, formerly Loudcloud. In case you're not familiar with Opsware, co-founder Marc Anderson's blog states they help "automat[e] large-scale modern datacenters and computer systems". He claims they have more than 350 customers, including Goldman Sachs, JP Morgan Chase, Home Depot, GE, Samsung, Comcast, Tivo, and the US Department of Defense -- and I guess he should know.

This is HP's third largest acquisition to date, with an apparent US$1.6B price tag. It follows Mercury (the second largest), Peregrine, and a host of other enterprise management software acquisitions during recent years. Clearly, HP have decided to (re)invest in software. Namely, enterprise management software for now. I've written several Hydrabits on HP's activities. Anderson's blog goes on to say that HP now has "[the] opportunity to define the architecture and be [a] vendor of infrastructure -- hardware and software -- for the huge Internet buildout of the next 10 years".

Hmm ....

Okay, enough reporting; there's enough journalists to do that. Time for some (informal) analysis ... sprinkled with a good dose of opinion (this is a blog after all).

Firstly, while I am not a financial analyst, this acquisition is over-priced, imho. US$1.6B for a vendor making US$100M in FY07.

Secondly, HP are overestimating the opportunity ... and underestimating the competition, imho. Firstly, while not a direct competitor, server virtualisation technology such as VMware will help many organisations to achieve similar outcomes. Moreover, many are already going down that path (not that they are mutually exclusive, either). Additionally, the usual suspects won't sit still either, not least of which is Microsoft (who seem to have a target squarely set on HP Software's back). BMC, CA, IBM/Tivoli and a bunch of others all have technology in this space -- irrespective of who the 'leader' may be. Then there is also the opportunity to bypass software and go straight to managed services/outsourcing. So I find it very hard to believe that this will be ‘game changing', as suggested by HP Software's senior executives.

Speaking of executives, one of the benefits will be the appointment of Opsware CEO Ben Horowitz to lead the bulk of HP Software's current portfolio. This will dilute some of the visible arrogance that came over from Mercury -- somewhat understandably given Mercury's market penetration in application quality software. Horowitz should be able to sit between the old OpenView and Mercury camps within the new HP Software organisation. It should also free-up Tom Hogan (head of HP Software) to look at other software market segments, including business inteligence.

I must admit that I am curious, also, on the claimed ‘huge Internet buildout' that is apparently coming. Hasn't it already happened, for the most part? Sure, enterprises will continue to add greater amounts of Internet ‘kit' but I suspect many will look to external providers. Who would want to replicate Google or Amazon's massive server farms if they don't have to?

Finally, while preparing this blog, and as a complete aside, I discovered that HP is also intending to acquire Neoware. While it is in a different category altogether, it is far more interesting, innovative, and potentially ‘game changing' move ... in my humble opinion, at least.