It is easy to pick sides between different platforms, whether they are hardware or software. However, if you want to lead the market, you need access to all of them and to become the central trusted vendor for the large IT shop. The reason HP is beating IBM solidly is because it is executing a strategy that gives its customers the choice between Microsoft, UNIX, Linux, Intel, AMD, thin clients, blade PCs, laptops, desktops, HD-DVD, Blu-Ray -- simply letting its customers have more choice than anyone else. And, amazingly enough, it is actually getting all this stuff to work together relatively well.
In effect, HP's tag line should likely be something like: "If you want choice, the only choice is HP." Its increasing market dominance reflects the execution of a strategy resonating broadly with the IT buyer.
Finally, note that in the initial briefings for the Opsware deal, HP emphasized the importance of the people. HP is showcasing a skill in doing acquisitions now, a skill that defined Cisco (who HP seems to be learning from) as it grew into the dominant vendor in its industry. Few companies have this skill, which IBM has never really developed despite the number of acquisitions that company has done, and it appears HP is accelerating its use of it.
Each of these acquisitions separately is interesting; together they represent a level of strategic execution unmatched in the industry. A lot of other CEOs could learn from CEO Mark Hurd.
Let's look at both acquisitions.
The acquisition cost is similar to what Google paid for YouTube, though while YouTube had not started generating much revenue at the time Google acquired it, Opsware had reached $100 million in revenue and was growing around 60 percent a year. This is the same growth rate that Google just declined to, and the revenue and the growth rate showcase how valuable this technology has become.
So while Google, which is also operating strategically, acquired an asset that may never generate by itself revenue that would justify the cost of the acquisition, HP's acquisition price was based on stronger financial fundamentals of revenue and growth.
More importantly, if you look at what Opsware tries to do and the size of the company, you should conclude it is operating well below potential. When a large corporation chooses a vendor for global, mission-critical tasks, it likes to choose similarly large global vendors. It also likes to minimize risk. Opsware has its roots in Netscape, which crashed and burned, embarrassing its few enterprise clients as it went under. Opsware shouldn't have been successful at all given just these two things.
In other words, Opsware has been operating at a significant disadvantage that HP can eliminate, because HP is better-known and is, in itself, a global company. In the end this acquisition, is vastly more likely than YouTube for Google to generate a massive return on investment simply because the strategic benefit to both companies has a solid base in measurable financial results.
Before IBM sold its PC division to Lenovo, it sold its thin-client business to Neoware. This had always seemed strange, because thin clients were the closest thing to a terminal in the current decade. You would think IBM would want to keep this solution for its mainframe customers.
With this acquisition, HP not only gains a foothold in a number of otherwise true blue IBM accounts, it does so by picking up after IBM left these companies hanging. It's never good to give a competitor access when you have account control, and letting one clean up after you is doubly dangerous.
In addition, HP is the only vendor, major or otherwise, that has a product set that includes thin clients, blade PCs, normal PCs, handheld computers and smartphones. It's interesting to note that Neoware is the only major provider of a viable mobile thin client laptop solution. The problem has been presenting all this as one entire solution, providing customers with the level of unmatched flexibility that all this promises. Right now, each part of this often is presented in a vacuum, and that doesn't reflect the power of the entire effort.
After the acquisition, HP should have the dominant position in both thin clients and blade PCs, which looped together represent the lion's share of PC alternatives on the desktop. Given that both companies were aggressive with their Linux-based thin-client products, it is likely HP, once this merger is complete, will have the largest installed base of Linux desktops in the world.
Wrapping Up: Opsware + Neoware = Strategic Advantage Showcase
While the combination of these two offerings is likely a year or so away, the combination should give HP significant leadership in the area of systems management, ranging from servers to desktops. The thin client and bladed desktops remain the most manageable, data center-centric, hardware solutions, and Opsware is the leading new tool for managing data centers.
Given each of these purchase decisions was driven out of separate divisions, I wonder how much of this powerful synergy is chance and how much was planned by Hurd. Given how HP has matrixed its CTOs into a central strategy group, this is more likely a plan. There's a good chance that Shane Robison, HP's chief strategy officer, is behind this. If so, it suggests his office is reaching its stride and we should begin seeing more big cross-division moves like this.
To be clear, there is no other company operating at this level of strategic efficiency across all divisions. That alone makes this announcement very interesting.