HP Buying Opsware for $1.6B

By Chris Preimesberger  |  Posted 07-23-2007

Hewlett-Packard is buying Opsware, a software vendor best known as a provider of data center automation products, for $1.6 billion, the two companies announced July 23.

The purchase of Opsware and its line of products will allow HP to integrate that technology into its own burgeoning line of BTO (business technology optimization) software. Combining the technologies from both companies will allow for better IT automation in large, enterprise-class data centers, according to HP officials.

At a 2006 event, Mark Hurd, HP president and CEO, and Ann Livermore, executive vice president of the company's technology solutions group, discussed HP's growing interest in BTO, or automating and managing technology. Most of this work is now done by manual or custom fashion and HP is looking to change that by creating a fully automated suite of products to manage the data center.

HP made a step forward in this area when it bought Mercury Interactive for $5.4 billion in July 2006. HP has since been rolling out products based on that acquisition, including new software for quality assurance, load testing, IT service management, and change and configuration management.

The addition of Opsware's technology to the portfolio it acquired through the Mercury and Peregrine Systems purchases will help extend HP's software capabilities to automate an entire enterprise data center, from initially provisioning servers, networks and storage devices to managing changes and upgrading the infrastructure to meet government regulatory requirements.

Click here to read more about HP's new management tools.

"The acquisition of Opsware is intended to enable HP Software to help our customers resolve one of their critical pain points: controlling the increasing complexity and cost of managing the data center," Thomas E. Hogan, senior vice president of HP Software, wrote in a statement accompanying the announcement.

At its recent Technology Forum & Expo in June, HP executives talked about moving the company beyond its traditional roots as a hardware provider to offering more software suites, management tools and services. In her address at that show, Livermore talked about how HP needs to leverage all of its various products—hardware, storage, software and services—into a package for its customers that will address a number of concerns, including more efficient management of the data center.

This new focus, coupled with the acquisition of high-end software offerings, is a signal that HP is getting ready to compete against similar management tools and services provided by IBM and other vendors.

"I think what they're [HP] looking for is a way to compete directly against, say, IBM Tivoli, and some of the other data center infrastructure management players," Charles King, an analyst with Pund-IT Research, told eWEEK. "HP's software strategy languished for a couple of years [under former CEO Carly Fiorina], whereas a lot of their competition moved forward aggressively ... They kind of stepped out of the middleware business and decided to pursue it entirely via partners. Instead, they focused more on the traditional printers business and more consumer-oriented products."

Click here to read Eric Lunquist's blog about HP's acquisition of Opsware.

With Hurd at the helm, King said HP has had more focus and it is reflected in the company's strategic acquisitions of the last two years.

"I think there was a bit a confusion at the company [under Fiorina]," King said. "They had adaptive enterprise, of course, but they also had the utility data center initiative going for a while that I haven't heard too much of anything about. I think under Mark Hurd, they have moved forward much more aggressively and much more coherently with their software strategy."

Opsware, Sunnyvale, Calif., was co-founded in 1999 by Netscape creator Marc Andreesen as Loudcloud, a provider of hosted enterprise software applications. The company then developed into a vendor for data center automation, compliance, virtualization and configuration management software. It now has about 350 customers.

"HP is getting a lot of nice technologies [from Opsware]," Forrester analyst Galen Schreck told eWEEK. "Their server provisioning and configuration management technology has been growing and maturing, and getting better all the time. That's all they do there."

Schreck added that with the addition of Opsware, he would now put HP ahead of IBM Tivoli, from a competitiveness standpoint.

"Opsware's server provisioning and config management tool, I think, was better than either HP's or IBM's," he said.

The Opsware acquisition comes on the same day that HP, in Palo Alto, Calif., announced that it would purchase Neoware, a provider of thin client devices.

Click here to read more about HP buying Neoware.

That move is expected to strengthen HP's infrastructure offerings from the hardware side by giving it access to Neoware's line of Linux-based thin clients, which will add to the company's own line of thin-client and PC blade products, which are offered under HP's Consolidated Client Infrastructure platform.

In addition, the purchase of Neoware, of King of Prussia, Pa., means that HP will now likely become the top vendor of thin client PCs. HP has been second behind Wyse Technology, while Neoware ranked third, according to analysts.

The Opsware deal is expected to close in the fourth quarter of 2007.

When the acquisition is complete, Opsware will become part of the HP Software business. At that time, HP will also appoint Ben Horowitz, the current CEO of Opsware, to lead the company's BTO organization.

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