On May 5, 2010, HP announced that Bill Veghte has been appointed executive vice president of the company’s Software and Solutions business, effective May 17. As a follow-on to the previous post, this raises a new question. Can and will HP build a broad software business?

The company has previously appointed leaders to its software business with the ambition of doing just that. And somewhat of a skeleton organization for a broader software business has been created. However, not much has come of that outside of the IT Management / Business Technology Optimization software (aka OpenView + Peregrine + Mercury + Opsware) business. Most of the rest of the revenue comes from systems related software. The point here is simply that the appointment of another software executive that claims software is strategic for HP does not alone mean HP will dramatically expand its software business.

HP’s press release (http://www.hp.com/hpinfo/newsroom/press/2010/100505d.html) says: “Veghte will lead the $3.6 billion business unit, which includes a number of industry-leading offerings:

• IT Management: helps clients improve efficiency and optimize investments with a broad range of management software that spans technology infrastructure, services and operations;
• Information Management: transforms information for better business insight by automating the search, management and retention of information across an enterprise;
• Business Intelligence: helps clients gain competitive advantage and create new business opportunities with solutions that connect intelligence across an enterprise; and
• Communications and Media: enables service providers to transform their communications service portfolios and achieve operational excellence.”

IT Management is clearly a strength. Of course more care and feeding must be applied as customer needs are quickly changing due to cloud computing. The other three (Information Management, Business Intelligence, Communications and Media) are interesting starts – but nowhere near “industry-leading offerings” as suggested.

So how do we answer the question “Can and will HP build a broad software business?” The “can” part is somewhat straight forward. HP is a massive company with huge financial reserves and growing profit. It has shown willingness to make large and risky acquisitions to grow its businesses (EDS in services, 3COM in networking, etc.). There are challenges as mentioned in the previous post and in the post to which it referred. There are other challenges as well, including the fact that some companies (IBM as the most obvious comparison) are many years ahead of HP here. Still, I believe HP *can* build a broad software business. It would take years of dedication and focus, piecing together acquisitions of smaller players and so on. And more years of tuning and refining. But it can certainly be done.

So will HP build a broad software business? The safe answer here is simply “wait and see.” This is because the track record is very poor, again, outside the IT management space. But instead of completely dodging the question, let’s take a look at some indicators. These are not so much predictive indicators, but progress indicators. If we see HP make these moves, it will become increasingly apparent that HP is indeed attempting to build out a broad software portfolio:

• If HP publicly articulates a credible software strategy. This is required. But still doesn’t prove it. Actions must follow.
• If HP moves to acquire large and / or multiple software businesses to fill out its skeleton software organization as noted above (or acquires relative to any new strategy). This is required. It cannot happen organically.
• If HP re-emphasizes software as a single business unit, rather than software and solutions. Not absolutely required, but important.
• If HP has the software business unit report directly to Hurd rather than Ann Livermore (this one is less important and less likely as Livermore heads all things enterprise focused)
• If HP adjusts its cost cutting focus to include a culture of innovation. This is required. HP has suffered a lot of attrition from software acquisitions where successful stand-alone software business employees were shocked with HP’s approach. Acquire and cut will not work.
• If HP realizes that commoditizing supply chains does not work with software as it does with hardware. This will require, again, innovation and getting ahead of the market in some key areas.
• If HP reinvigorates its software employees (and any to be hired / acquired employees).
• If HP capitalizes on shift from traditional software to software as a service (SaaS). This is not only critical, but serves as a huge opportunity. Cloud and SaaS are inflection points in the IT evolution curves. This will open the possibility to challenge some of the traditional software incumbents.
• If HP allows software business decisions to me made “at the expense” of hardware business decisions. Of course HW & SW must both succeed. So “at the expense” is too much… the point is that HW businesses cannot continue to make partner deals and drive their own software strategies to the detriment of SW. This is critical and fundamental. And difficult. And not well understood. Good luck on this one even if HP does go after the broad software portfolio.
• There are many more ifs… So, if and when HP begins to build out a software portfolio, I will likely point out some more.

Veghte said in the press release “Software is a strategic part of driving greater innovation to our clients, and I look forward to leading the HP software team to continue to build a world-class business.” Mr. Veghte: the IT world anxiously awaits your software strategy and, I believe, wants to see HP succeed here. I certainly do. Best of luck in your new role, whatever the strategy. Just one request... Please do not tell the world again that HP is going after software and then simply not do it.