Why HP is sticking with the software-for-the-CIO strategy

tom_hogan.jpgThe first thing they told us when a group of local media sat down with the head of HP’s worldwide software division on Thursday is that the company has a policy of not discussing its competitors. This, despite the fact that one of them happily answered my questions about the BMC takeover of BladeLogic a week or two ago, and despite the fact that the executive in question, Tom Hogan, wasted no time in bringing up IBM.

“To speak candidly, I watched IBM struggle to get to that $100 billion mark, which they still haven’t achieved,” he said. “There’s an issue when big chunks of your business are hardware-based.”

Of course, you could say the same about HP, and perhaps even more so. Before its purchase of Mercury Interactive and later Opsware, the company was not much of a software player, despite its OpenView product line. Hogan, a former IBMer who joined HP two years ago, admits this. “If you asked about HP as a supplier five years ago . . . you would have heard that it’s got great products, but not the company I would call if I needed to solve a business problem,” he said.

Hogan claims the software unit is now the fastest-growing in the company, even outpacing HP’s traditional money-maker, which is printing and imaging. What’s intriguing about its strategy to me is its target audience. Instead of chasing after line of business managers or senior executives, as everyone from SAP to IBM appears to be doing, HP remains more focused than ever on the needs of the CIO and the IT department. In this respect, it is zagging where a lot of the competition is zigging.

“When we’re calling on a CIO, we tell them, ‘We’re not hear to compete on a packaged applications basis,” he said. “What we want to do is help the CIO drive better business outcomes from their total investment in IT.”

Hogan compared the situation of users, whose manual processes have slowly been replaced by automation through enterprise resource planning, customer relationship management and the like. “No one said, ‘What about bringing (that level of automation) to the CIO?’” he said.

Some have, of course, but the pressure to demonstrate how well IT is aligned to the business has led some vendors to bypass CIOs altogether and go straight to those they report into. Although it has been building its business intelligence product line, HP’s primary focus is on the management of infrastructure, the network and information related to it. I had to cringe, however, at its acronym of BTO, which stands for business technology optimization, and the subset BIO, or business information optimization. These will not only be confused with business process outsourcing (BPO) and business process management (BPM), they will be less memorable than the company’s ill-defined “adaptive enterprise” motto.

As refreshing as HP’s attention on the IT department is, I see two problems. One is its under-developed professional services organization, which IBM continues to dwarf and which Dell will likely surpass if it manages the right kind of channel strategy. The other is cloud computing. I asked Hogan what he thought the impact of cloud computing would be on HP’s software plans – whether, in five years, his customers would still be enterprises or merely the handful of providers to those enterprises.

His answer? That cloud computing was poorly understood, and that even if you knew what it was, a lot of business units would rather make requests of their IT departments without getting a service charge. I argued that some cloud providers could be better automated than most enterprises today. “They could,” he acknowledged, “but a lot of organizations who have farmed some of that out are now taking it back in house. If you asked many organizations about their provider relationships, they are not happy right now.”

Hogan, and HP in general, had better hope so.

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