Acquisition of Mercury Interactive has elevated IT giant's image as the sixth-largest software provider in the world, writes Éamon McGrane.

Denis Neavyn is puzzled. Hewlett Packard's head of software in Ireland has just been asked, on the back of the deal with software company Mercury Interactive, if HP is finally getting serious about software. It's a question he's been asked often of late and he still doesn't understand the thinking behind it.

The funny thing about it, as Neavyn sees it, is that HP has always thought it was serious about software. Perhaps the problem lies in telling people that.

"It's interesting that the market has perceived what we've done with Mercury as us putting our hand up and saying we're serious about it. We've been pouring a very substantial amount of our R&D money into software for the last three to four years.

"To be honest, software is the most profitable business within HP. And if you look across the portfolio of products and services that we offer and places where we can make additional money, software is on top of the list.

"That's been vindicated by the decision to buy Mercury."

Let's backtrack a bit and see where the genesis of the question came from. A few weeks ago HP decamped to Vienna, Austria for its Software Universe conference, the company's annual "love-in" for its customers.

The IT giant recently acquired software company Mercury Interactive and the main thrust of the convention was to tell its audience how the two companies' products would integrate and how organisations could use them to "optimise the business outcomes of IT investments".

In other words how to get a better bang from your IT infrastructure - using HP's software.

HP has effectively paid $4.5 billion (€3.4 billion) for Mercury Interactive, the second biggest acquisition in the history of the company after the controversial Compaq deal in 2001.

The purchase of Mercury has elevated HP to the sixth largest software provider in the world, with something over €2 billion in revenue worldwide and 7,000 people now directly employed by the company working on software.

HP's approach to its existing and new software products will be to put them into what it terms "software centres". Products that touch on similar areas will be grouped together. The products within the centres will have a common look and feel and can be standalone, as indeed can the portfolio of centres.

The job of the software will be to optimise a company's IT, run it as a business and have it making money as opposed to it being a big technology hole into which money is poured.

"We're not trying to build one big single product to address the areas of business technology optimisation because, from an engineering and product perspective, that can't be done. But what we are trying to do is make logical groupings that follow traditional software modules such as business service management or quality assurance or service-oriented architecture (SOA) transformation.

"So we've taken industry best practice and tried and group the products and create the centres," says Neavyn.

"What we're saying is IT is so much a part of your business, surely you should try and run it as a business and, if you're doing that, there are certain things in terms of process that you need to do.

"Today, it can be hard to do those things because you don't have the products to help you do it. And helping the business do that is the focus of these products."

In terms of Ireland, the Mercury deal means that its Irish employees will now become HP people. It should also mean that HP will see a significant increase in its software revenues in Ireland as its portfolio expands. Neavyn said the product set would be packaged in Ireland for its SME driven market.

"We hope to make them more appealing to an SME economy and deliver the products on an Irish scale - that's our challenge from a technology perspective."

It certainly raises an eyebrow when this acquisition is compared with the controversy that seemed to dog HP's Compaq purchase at the beginning of the decade.

Indeed it could be argued that that deal ultimately lost former chief executive Carly Fiorina her job.

So, will the current boss Mark Hurd have a few uneasy nights due to the scale of the latest feather in the HP cap? Neavyn doesn't think so. "There's not such a significant level of risk with the Mercury acquisition because the amount of overlap isn't substantial, there's no large loss of people in terms of workforce consolidation and the reaction from the market has been positive. Even the customers are happy," he says.

So, back to the original question. Why do people think HP hasn't been taking software seriously?

"Personally, I think in the Irish market we haven't done as good a job as we should have at actually telling people we do have these software products and what they do. So maybe the acquisition of Mercury will be the catalyst in getting the HP software message out there."

Maybe it will.