Hewlett-Packard Pushing Toward 'Adaptive Enterprise'

Acquisitions of Novadigm and Consera add to the company's high-end software capabilities.
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Seeking to bolster its credentials in high-end computing,

Hewlett-Packard

(HPQ) - Get Report

announced two acquisitions Wednesday, bringing to five the number of software outfits it's acquired since September.

H-P said it will pay $116.5 million to buy Mahwah, N.J.-based

Novadigm

(NVDM)

and will shell out an undisclosed amount to buy privately held

Consera Software

, headquartered in Bellevue, Wash.

On Wall Street, analysts viewed the buy as merely another incremental step within H-P's larger strategy, and the shares showed only a muted reaction. Recently, H-P shares were off 55 cents, or 2.3%, to $23.36.

Meanwhile, Novadigm shot up $1.39, or 30%, to $6.03. H-P already owns 5% of the company and said it will pay $6.10 per share for the remainder of the company's 19.1 million shares outstanding.

The purchase of so-called management software companies fits with H-P's push into "adaptive enterprise" -- the company's jargon for making corporate computers and storage devices able to work together more efficiently and with less intervention from humans.

Nora Denzel, senior vice president of adaptive enterprise at H-P, said Consera's software will help companies model how they want their information technology to work -- for example, what to do if a server comes under attack, or if an important application runs out of storage -- while Novadigm will help automate those changes.

"The key point is not only about managing stuff but also automating things that have been manual labor-based in the past," said Frank Gillett, principal analyst at Forrester Research. "What they've done is take steps in that direction. They need to add capabilities for heterogeneous automation, meaning servers other than their own."

H-P already claimed adequate software for managing its own gear, said Gillett. "Where they were weaker was in the capability for automating and proactively managing third-party equipment. That's what this acquisition

strategy is about."

Automation software can sharply reduce the amount of time that a company's tech staff needs to spend managing servers, he added. One medical products division of a Fortune 500 company that implemented the software found one person could patch up servers within 24 hours, while before it had taken three people two weeks.

IDC projects that global sales of management software will reach $10.1 billion by 2007, H-P noted.

Forrester's Gillett suggested H-P's acquisitions may have been prompted in part by

IBM's

(IBM) - Get Report

acquisition of

ThinkDynamics

last summer. Through the deal, IBM gained software that could automatically reprovision servers and storage depending on demand.

But Denzel claimed the buys were "absolutely not" a reaction to the Big Blue purchase. "This is a strategy we've had in the market for a long time," she said.

In any case, Gillett says the two companies are running about neck in neck in building up services to push their vision of smart corporate data centers. "IBM calls it 'on-demand'; H-P calls it 'adaptive enterprise'," he noted. "But they're roughly in the same place, with different strengths and weaknesses. This just gives H-P the building blocks to close one of their gaps."

As companies slightly boost their IT budgets this year, Denzel contends that smart software is likely to rank high on the priority list. "We've definitely seen a loosening in the market in terms of software spend, specifically around manageability tools -- anything that allows you to deploy without using people and operate your data center without as many people," he said.

Currently, it's common for companies to have one systems administrator managing only 20 to 30 machines, within a data center that may contain thousands of computers. But automation software could help one tech staffer manage as many as 300 servers, she said.

Denzel predicted the Consera acquisition will close within about 30 days, while the Novadigm buy is expected to wrap up within the first half of 2004.