Like IBM before it, HP seems to have come to the realization that satiating CIO’s growing appetite for business analytics software is a better business than manufacturing low-margin personal computers.
During its Q3 earnings call last week, HP announced its intention to get out of the PC and mobile device business and revealed it is in negotiations to acquire Autonomy, a U.K.-based enterprise search vendor that specializes in software to analyze unstructured text-based content.
Both moves, as well as its acquisition of Vertica earlier this year, indicate HP will focus much of its efforts – and bank much of its future — on the enterprise software market. Specifically, HP is hoping to ride the Big Data wave to big profits.
The good news for HP is that it has one of the leading, if not the leading, Next Generation Data Warehouse in Vertica. Unlike competing offerings from EMC Greenplum and Teradata Aster Data, Vertica ’s MPP analytic database was built with a columnar-oriented architecture from the ground-up. This allows it to run analytics on compressed data, improving query speed and performance.
Assuming the Autonomy acquisition comes to fruition, HP has another important piece of the Big Data puzzle. Autonomy, Europe’s second largest software vendor after SAP, helps enterprises discern meaning from text-based content through a combination of natural language processing, relevancy ranking and other technologies. Unstructured data like text and social media data accounts for the lion’s share of growing data volumes.
Still, making the transition to Big Data heavyweight will be no small job for HP.
With Vertica and Autonomy in the fold, HP has the analytic database and unstructured content analytics layers of the Big Data stack accounted for, if not quite perfected. But the company is still missing a key layer: business intelligence and data visualization tools to deliver traditional structured data analytics to end-users.
The business intelligence layer is critical for HP to compete with SAP, Oracle and IBM in the enterprise software market. One option for HP is to develop BI and visualizations tools internally, but the company already tried that once – and failed. HP shuttered its Neoview BI platform late last year after they failed to gain traction with customers.
More likely HP will look to acquire one of the remaining independent BI vendors – perhaps Microstrategy or Tableau, both current Vertica partners – or, just maybe, SAP. SAP’s BusinessObjects portfolio is among the top BI offerings on the market and an HP-SAP marriage has long been the focus of speculation in Silicon Valley and on Wall Street.
In either case, HP will still have a lot of product integration to do to deliver a cohesive Big Data software and services stack. All of this will take time, and HP is counting on investors to be patient. And they’re going to need to be. Consider that enterprise software currently accounts for just 2% of HP’s annual revenue. Last quarter that amounted to $780 million. In contrast, IBM reported $6.2 billion in software revenue for Q2 2011.