IBM, HP On a Buying Binge

The headlines were hard to miss and the comparisons even harder as IBM and Hewlett-Packard shelled out big bucks recently to bolster their software offerings.

IBM's strategy has been clear--leveraging the success of its Software Group to connect the dots between its software products and services offerings. But the vendor has taken yet another step in that direction, announcing it will acquire MRO Software, an asset-management software specialist, for $740 million.

By bringing Bedford, Mass.-based MRO into the fold, IBM will be gaining technology that complements its Tivoli management software portfolio and leads a trend toward the convergence of tools that manage IT assets and tools that manage industrial assets, such as truck fleets.

"Clients want a consistent way to manage all of their industrial assets, from procurement to retirement, along with their IT assets," said Al Zollar, general manager of IBM's Tivoli division, during the announcement of the MRO deal. "Clients have a common goal of a single, consolidated architecture."

The fact is, with so many core industrial assets, from trucks to planes to parts, now sporting embedded chips, RFID tags or another tracking technology, this kind of convergence becomes possible, Zollar explained.

In addition to its flagship Maximo Enterprise Suite, MRO also brings to the table a service desk and service-management portfolio that can be baked into solutions developed by IBM and its partners, according to MRO CEO Chip Drapeau, who will stay onboard at IBM, reporting to Zollar.

The goal for IBM, ultimately, will be to meld these products into solutions that serve as repeatable tools for its consulting arm and partners, who are expected to find further opportunity by customizing for vertical industries.

Meanwhile, HP, too, is looking to beef up its software business, which only recently turned a profit despite industry-leading tools such as OpenView. HP's planned acquisition of Mercury Interactive for $4.5 billion would give the company a strong foothold in the growing areas of business optimization, application testing and performance management--spaces that IBM and CA now dominate.

On a conference call announcing the deal, HP president and CEO Mark Hurd said Mercury will complement HP's OpenView business, as well as the asset-management software that HP acquired from Peregrine Systems last year.

Hurd says he's made it a priority to grow that business, and that he now sees opportunities to grow margins for software and associated services. HP's software business cracked $1 billion for fiscal year 2005. Adding Mercury effectively will double that business, Hurd says.

"HP is building a software business to be reckoned with," he says, adding that there should be little trouble combining HP and Mercury. "We think that together they provide a software powerhouse."

The key for HP will be removing complexity from its overall software portfolio, says Dennis Drogseth, an analyst at Enterprise Management Associates.