HP looking to build on Mercury’s SaaS offerings in IT management

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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

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.