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Jordhy Vladimir Ledesma
UID - 5380-69651
B2B Marketing in the Software Industry: Marketing HP Software
The term software industry started appearing in print since the 1960s. The pioneers of this
industry were IBM and UNIVAC, with Digital Equipment Corporation a close third
industry has grown exponentially and expanded into many subsectors: infrastructure, middleware,
security, enterprise, utilities, games, applications, etc. The most recent revolution in the software
industry might very well be the “app phenomena”. Driven by the introduction of the iPhone and
the iPad, thousands of software vendors have started to create (or port) applications to a closed
ecosystem that powers mobile computers.
HP started investing in the software industry in late 1991, with the acquisition of ABB CADE (a
small computer programming shop
), then it acquired EEsof in 1993, Security Force Software in
1999, etc. At the beginning, these acquisitions were aimed at enriching HP’s hardware ecosystem;
but soon, the company began acquiring pure software industry players. The most recent example
of this trend is Autonomy Corporation, acquired by HP in August 2011 (for 10.2 billion dollars).
A public list of acquisitions and key HP people can be found at crunchbase.com
. Such a list
indicates close to 40 billion dollars in acquisitions of which roughly fifty percent (taking into
account Autonomy, EDS and other smaller players) where devoted to the software/IT services
industry. It is therefore very clear, that HP is gearing its guns toward the software industry and
will soon follow the steps of IBM, Apple, Sun
The many changes in HP’s board and executive roster point to a clear strategic shift for the whole
company. Recently, Meg Whitman (who became prominent in the tech industry after growing
eBay from a nimble startup to a multibillion dollar powerhouse) appointment as HP’s newest
CEO joins the series of events that signal HP’s transition into the software/services field.
However, of all the tech firms that have exercised this crossover, HP is the most associated to
hardware, and particularly, to engineering.
Bill Hewlett and Dave Packard (two engineers) founded HP in 1939, at a garage in Palo Alto,
California. At its core, HP still maintains an engineer-centric culture that extends throughout the
corporation and has allowed it to become the number one personal computer manufacturer in the
The purpose of this paper is to analyze whether and how can HP penetrate the software/services
industry and become an important player while retooling its brand for such a purpose. We’ll
analyze several industry players, a handful of B2B strategies and tools as well as key customer
demographics and markets.
2.1 Key Players
According to Price Waterhouse Coopers
, the software industry is very fragmented; with players
that span different geographies (Asia is 20% of the market, Europe 36% an America is 44%),
segments (gaming, desktop tools, enterprise software, networking, etc.) and key delivery strategies
(SaaS, cloud computing, client-server, mobile, etc.)
. According to Pwc, Hewlett-Packard is
currently the seventh player in this industry with software revenues that add up to approximately
3 billion dollars. The other top players that act in markets where HP competes are: Microsoft,
IBM, Oracle, SAP, EMC (including VMware), Computer Associates and Apple. Another
company included in Pwc but not currently a top player (mainly due to the lack of maintenance
an licensing fees) is Google.
Microsoft, founded in 1975 by Bill Gates and Paul Allen, is a veteran software company,
best known for its Microsoft Windows operating system and the Microsoft Office suite
of productivity software. Starting in 1980 Microsoft formed a partnership with IBM
allowing Microsoft to sell its software package with the computers IBM manufactured.
Microsoft is widely used by professionals worldwide and largely dominates the American
corporate market. Additionally, the company has ventured into hardware with consumer
products such as the Zune and Xbox. Microsoft has made a presence on the Web with
the MSN Internet portal and Bing Search Engine.
IBM, acronym for International Business Machines, is a multinational computer
technology and consulting corporation. The company is one of the few information
technology companies with a continuous history dating back to the 19th century. IBM
manufactures and sells computer hardware and software, and offers infrastructure
services, hosting services, and consulting services in areas ranging from mainframe
computers to nanotechnology.
Oracle Corporation is an American multinational computer technology corporation that
specializes in developing and marketing hardware systems and enterprise software
products – particularly database management systems. Headquartered in 500 Oracle
Parkway, Redwood Shores, Redwood City, California, United States and employing
approximately 108,000 people worldwide as of 31 May 2011, it has enlarged its share of
the software market through organic growth and through a number of high-profile
acquisitions. By 2007 Oracle had the third-largest software revenue, after Microsoft and
As market leader in enterprise application software, SAP (NYSE: SAP) helps companies
of all sizes and industries run better. From back office to boardroom, warehouse to
storefront, desktop to mobile device - SAP empowers people and organizations to work
together more efficiently and use business insight more effectively to stay ahead of the
competition. SAP applications and services enable more than 172,000 customers
(includes customers from the acquisition of Sybase) to operate profitably, adapt
continuously, and grow sustainably.
EMC is a manufacturer of software and systems for information management and
storage. EMC produces a range of enterprise storage products, including hardware disk
arrays and storage management software. Its flagship product, the Symmetrix, is the
foundation of storage networks in many large data centers.
6. Computer Associates
CA, Inc., together with its subsidiaries, engages in the design, development, marketing,
licensing, and support of information technology (IT) management software products
that operate on a range of hardware platforms and operating systems.
The company has a portfolio of software products and services that address its customers
needs for mainframe and distributed environments, spanning IT governance, IT
management, and IT security. It focuses on various areas that include infrastructure
management, project and portfolio management, security management, service
management, application performance management, and data center automation and
CA, Inc. offers Enterprise IT Management (EITM) software for organizations to
manage IT in computing environments, which include people, information, processes,
systems, networks, and applications, as well as databases from a Web service to the
mainframe to a virtualized cloud, regardless of the hardware or software customers they
are using. The company licenses its products principally to IT service providers, financial
services companies, governmental agencies, retailers, manufacturers, educational
institutions, and healthcare institutions worldwide through direct sales force, as well as
indirectly through systems integrators, managed service providers, technology partners,
EITM value-added resellers, original equipment manufacturers, and distribution and
Started by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has expanded from
computers to consumer electronics over the last 30 years, officially changing their name
from Apple Computer, Inc. to Apple, Inc. in January 2007.
Among the key offerings from Apple’s product line are: Pro line laptops (MacBook Pro)
and desktops (Mac Pro), consumer line laptops (MacBook) and desktops (iMac), servers
(Xserve), Apple TV, the Mac OS X and Mac OS X Server operating systems, the iPod
(offered with up to 120 GB of storage with the iPod classic or with web browsing and
touch screen controls with the iPod touch), and the iPhone (now available for sale in over
Google provides search and advertising services, which together aim to organize and
monetize the world’s information. In addition to its dominant search engine, it offers a
plethora of online tools and platforms including: Gmail, Maps and YouTube. Most of its
Web-based products are free, funded by Google’s highly integrated online advertising
platforms AdWords and AdSense. Google promotes the idea that advertising should be
highly targeted and relevant to users thus providing them with a rich source of
Google has also made strong moves into the web-based apps space with acquisitions of
Jotspot (documents), 2Web Technologies (spreadsheets) and Zenter (presentations). The
company has also made a splash with the acquisitions of YouTube, DoubleClick and
In 1996, Stanford graduate students Sergey Brin and Larry Page famously started the
search company in a Stanford dorm room. The two eventually moved the company to a
Menlo Park garage, which the company quickly outgrew. Sun Microsystems founder
Andy Bechtolsheim was the company’s first investor with other notable investors
including Ron Conway, John Doerr, Mike Moritz and Ram Shriram.
HP creates new possibilities for technology to have a meaningful impact on people,
businesses, governments and society. The world’s largest technology company, HP brings
together a portfolio that spans printing, personal computing, software, services and IT
infrastructure at the convergence of the cloud and connectivity, creating seamless, secure,
context-aware experiences for a connected world. More information about HP (NYSE:
HPQ) is available at http://www.hp.com/.
2.2 Industry Summary
Due to the high fragmentation of the industry, and to incorporate smaller players into our
analysis, it would be in our best interest to list the most important industry companies in terms of
their go to market strategy. This will allow us to identify new niches and unexplored customer
segments for HP. An initial industry summary is shown in Table 1.
Table 1. Industry Summary
Company Top 3 Key Geographies Top Key Markets Marketing Channels Key Competitive
HP US, Europe, China Consumer, Enterprise,
Online, TV, Channel
Microsoft US, China, India Operating Systems,
Sales force, Online,
Market share, partner
IBM US, Europe, China Integration, Middleware,
Sales force, Partners Industry expertise,
Oracle US, China, India Infrastructure Sales force, Partners Technology, Vendor
SAP Europe, Americas, China Enterprise, Consulting,
Partners, Sales force Technology, Market
EMC US, Europe, China Infrastructure, Middleware Partners, Sales force Technology, Vendor
CA Americas, Europe, India Infrastructure, Middleware,
Sales force, Online, TV Industry expertise,
Apple US, Europe, China Consumer, Mobile Online, TV, Stores Technology, Content
Google Americas, Europe, India Consumer, Mobile, Operating
Online, TV Technology, Market
Startups - Niche Markets Search Engines, Social
Source: Created by Paper Author
The market is obviously fragmented and complex, with new players coming in every quarter.
However some things are very clear from looking at Table 1: A. Market share is a key enabler of
sales in the industry (customers prefer to buy software solutions from hardware manufacturers to
simplify integrations), B. As the player gets bigger, technology become less relevant to drive the
sale and instead gets replace by integration or industry knowledge and C. Channel partners are
key in maintaining a leadership position in the industry.
2.3 Industry Trends
In the HP Americas Partner Conference (APC), Léo Apotheker (HP’s previous CEO)
showcased the corporation’s revamped go-to-market strategy: “To arm our partners with
complete, end-to-end solutions to meet the customer demands of today and tomorrow”
unclear statement that aims to position the corporation as a one-stop shop for its customers IT
“As the convergence of cloud and connectivity continues to redefine the technology landscape,
HP and our channel partners are well-positioned to capitalize on this tremendous market
said Apotheker, who addressed partners in March, 2011. This convergence is the
key industry dynamic that HP is concerned with, and has communicated in numerous public
events. Other industry trends include a growing concern for China and India, the
“consumerization” of technology
and the rise of tablets and mobile devices.
Given these trends, HP’s B2B marketing strategy should adapt to include more partners in key
geographic areas, tools and services that allow for new product demonstration, tighter integration
with traditional computer stores (to serve the small business buyer), a different branding message
that should now include software solutions and different software delivery methods (cloud, client-
server, etc.) to cater key client needs.
3. Product Roster
HP sells more software products than hardware solutions. Yet HP is widely known as a computer
manufacturer. For small businesses and home office buyers, HP resells software from Adobe,
Trendmicro, Microsoft, and others. In the enterprise field, however, Hewlett-Packard makes its
own software solutions
For example, the HP Database Archiving Software
promises to “reduce costs, boost performance,
enable compliance and application retirement” and competes with solutions from Oracle,
Microsoft, IBM and EMC. As with most of HP’s software solution we might instantly notice a
lack of product branding, a very specialized product offering (instead of perhaps the mega products
that Microsoft, IBM or Oracle sell), and several other details that surfaced from our company
analysis: a very technically driven sales process, different price point for each channel partner
(depending on sales volume), a complete disconnect from every other HP product (due to rapid
acquisition timelines) and lack of comparables in the product’s sales copy (who’s the competition,
who is this product for, what the targeted client size, etc.).
The HP Software
division employees 14,000 professionals and has been formed thru the
acquisition of 15 software companies. HP Software sells three categories of software: IT
performance management, IT management software and information management software.
This brank of HP also provides consulting, Software as a service, cloud computing solutions,
education and support services.
HP sales mainly IT management products (this will change after the Autonomy acquisition,
which will bring the company to middleware sales) via product centers. This highly complex
distribution can be seen in Table 2:
Table 2. HP’s IT Management Software Product Centers
Product Center Key Products Acquired
Main Purpose of the Products
HP Application Security
DevInspect, Assessment Platform, QAInspect
- Protect hardware from hackers,
viruses and malware
HP Business Availability
Business Service Level Management Software,
Business Process Monitor, Business Process
Insight, Discovery and Dependency Mapping,
End User Management Problem Isolation, HP
SiteScope, System Availability Management,
TransactionVision and HP Universal CMDB
- Ensure a high availability in
HP Business Service
- - Ease IT management
HP Data Center
Business Service Automation Essentials,
Network Automation, Server Automation,
Service Automation Reporter, Service
Automation Visualizer, Storage Essentials,
Operations Orchestration and Release Control
- Aid in datacenter growth, software
updates and maintenance
Network Node Manager, Performance Insight,
Report Pack for Cisco Wireless LAN Pack,
Report Pack for Radius Call Detail v 1.3., and
HP TeMIP Software
Compaq Manage complex networking
HP Operations Center Discovery and Dependency Mapping,
GlancePlus Pak, Operations Dashboard,
Operations Manager Dependency Mapping
Automation, HP Operations Manager i 8.0,
Operations Smart Plug-ins, Performance
Manager, Reporter, SiteScope, and HP Universal
Opsware Manage Operations in complex
datacenters (as opposed to managing
stand alone serves)
HP Performance Center Center Management for Performance Center,
HP Diagnostics, HP LoadRunner Monitors, and
HP Project and Portfolio
HP Deployment Management module,
Discovery and Dependency Mapping software,
PPM Demand Management module, PPM
Financial Management module, PPM Portfolio
Management module, PPM Program
Management module, PPM Project
Management module, PPM Resource
Management module, and PPM Time
Mercury Manage IT related projects,
Datacenter and software
HP Quality Center HP Business Process Testing, Center
Management for Quality Center software,
Change Impact Testing for SAP Applications,
HP Functional Testing software, QuickTest
Professional, Requirements Management
module, Service Test Management module for
SOA, Service Test and HP WinRunner software
- Aid in software and hardware testing
across different platforms
HP SOA Service-
SOA Governance Interoperability Framework,
SOA Policy Enforcer, SOA Registry
Foundation, SOA Systinet and HP Universal
HP Service Management
Asset Manager, HP Connect-It software,
DecisionCenter, HP Client Automation
Software to manage client computes
across a network
Software and Service Manager software
HP Business Service
Portfolio of service management software tools
that provide the IT department with end-to-end
monitoring of services in the data center and the
Aids in cloud computing
management as well as SaaS
HP Application Lifecycle
HP ALM 11.0 Centralized application management
platform for automating applications
within and across teams
HP Software Cloud
HP Cloud Discovery Workshop, HP Cloud
Roadmap Service, HP Cloud Design Service and
HP Service Management Consulting Services
Manage the entire lifecycle of the
cloud, both public and private, as
well traditional IT delivery.
Source: Created by Paper Author
From looking at Table 2, and reviewing the list of acquisitions, we realize that (as e-Week
magazine says) HP has become a true software organization
. This needs to be reflected in a
new branding effort as well as in more consistent product naming and packaging offerings. The
“Product Center” grouping is useful in communicating the practical application of HP’s software
products but could still be much simpler.
5. Customer Segmentation
After branding has been dealt with, HP should retool its business customer segmentation charter.
HP contacts 42 million customers each month
, mostly thru channel partners. Most of these
partners use solutions provided by HP to segment and contact these customers. The first level of
segmentation of these customers is hardware/software, after customers are segmented by
geography, industry, size and longevity. Later in this report, we’ll voice our recommendations for
HP sells software primarily via channel partners. This is not to be confused with their hardware
practice (with uses conventional channels as means of branding/sales). For HP Software, the
channel partner is the only means of acquiring software solutions. This affects the company in a
very subtle way: end-customers experience HP Software solely thru third parties, thereby
digesting a perhaps diluted marketing message.
Figure 1 – HP Software: Channel Partner Structure. Source: HP Software
6.1 Lead Generation
Some lead generation is executed thru Google AdSense, conferences, Webcasts, etc. In this sense,
HP has been very conservative in this regard, and, for this reason, its revenues are not a big
multiple of that of its acquired software companies. However, by exploring economies of scope
and scale, HP Software has reduced its client acquisition and management costs by 15%
6.2 Sales Conversion
Software is HP’s most attractive item in the balance sheet. Margins obtain on software sales hover
the 80% margin. HP has even been able to better Microsoft by having bigger revenues in the
server and tools category
(see Exhibit 15.3). A big area of improvement for HP Software might
be to cut the sales cycle to make it close to Microsoft’s (which, perhaps due to brand or footprint,
closes sales much faster).
7. Geographical Considerations
A new trend in the consumer industry is for companies to target psychographics instead of
geographies. In B2B marketing, this is (although much, much more slowly) becoming a trend, as
analytics packages get better and information becomes more open and broadly available.
Currently HP Software doesn’t target startups in any geography, so when these startups become
public companies, HP has already lost them to open source solutions or the competition.
8. Product Launches
HP caters to CIOs by assembling big conferences, online events and seminars. Several of these
events have been the platform for product launches, but their impact (in our Internet era) is
questionable. New product launches are not sharable on the social web and most of HP’s
whitepapers are hidden in its website. By contrast, Dell’s hardware is more discoverable after a
launch and Oracle software is much better presented on Oracle’s website.
10. Customer Relationship Management
HP excels in this area. IT uses the most sophisticated CRM package on the planet and it runs
one of the biggest Siebel implementations of the software industry. Only Oracle is superior to HP
in this regard.
11. Some Conclusions
On this paper we have explored the software industry and several of its nuances. Our analysis has
been effective in casting light over the many misperceptions the general public has about HP.
While being today mainly a software company, HP is still perceived as a hardware pure player
with a side-business of selling software. This branding problem is hurting the firm and negatively
affects the influence power of its sales force and partners.
In 2011, HP Software sales grew 28 percent and operating margins were 27.7 percent. Licenses
and services grew 33 percent and 36 percent, respectively. This came after a consolidation effort
of HP’s product lines and services. Clearly, HP should continue simplifying its product roster and
enriching the HP Software brand.
12. Some Recommendations
For HP Software, our gamut of recommendations is very broad:
1. Better the HP Software brand by launching similar campaigns to IBM’s Smarter Planet,
therefore enhancing the perception of HP as a value added software and solutions
2. Anticipate trends in the enterprise market and provide solutions for it as soon as possible.
For instance, HP Software doesn’t sell any applications for the iPhone or iPad.
3. Retain the branding of previous products to elicit awareness of longtime customers (the
branding of EDS’s, Mercury’s and Opsware’s products has been lost)
4. There’s a high disconnect between the profit margins of the hardware/software segments
of HP (5% vs 20%). Given this scenario, it makes sense for the computer giant to retool
its consumer business, sell it or use its software offering to increase its margins.
5. Product suites should be sold at a discount and maintained not only by channel partners
but also by HP. This ensures better customer support and the attainment of even more
usage and satisfaction metrics.
6. Newer corporate customers should be segmented by performance metrics (in the case of
startups), because they don’t fit in the profile of the Fortune 500 but constitute an
important market for HP (Google is one of HP’s biggest hard disk buyers).
7. For the purpose of B2B sales, HP should offer a comparison of their product versus that
of the competition (borrowing from the competitor’s brand and providing instant
recognition to HP’s products).
8. Reduction of the sales cycle should be a key managing indicator, and possibly a good
metric to compensate partners.
9. New products, whitepapers and demos should be shareable over the social web.
10. Partners should have access to virtual servers to demonstrate all of HP’s software
solutions and not just a few.
Hopefully, Meg Whitman, HP’s newest CEO, will conduct these and other recipes to make HP
Software a better B2B citizen and restore the engineering spirit that made Hewlett-Packard the
biggest computer manufacturer on the planet.
15.1 The Software Industry
15.2 Top 30 Software Vendors
15.3 Microsoft’s Profitability by Software Segment
15.4 About HP Software (Source - HP’s 2011 10K)
HP Software is a leading provider of enterprise and service-provider software and services. Our
portfolio consists of: Enterprise IT management software.
Enterprise IT management solutions, including support and professional services, allow customers to manage
IT infrastructure, operations, applications, IT services, and business processes. These solutions also include
tools to automate data center operations and processes. We market them as the HP business technology
optimization suite, and we deliver them in the form of traditional software licenses and, in some cases, via a
software-as-a-service distribution model.
Information management and business intelligence solutions. Our information management and
business intelligence solutions include information data strategy, enterprise data warehousing, data
integration, data protection, archiving, compliance, e-discovery and records management products. These
solutions enable businesses to extract more value from their structured and unstructured information.
Communications and media solutions. Our communications and media industry solutions address the creation,
delivery and management of consumer and enterprise communications services, with offerings in service
delivery infrastructure and applications, real-time business support systems, next-generation operations
support systems and digital media.
These solutions enable operators, media companies, and network equipment providers to drive incremental
revenue, enable new business models and reduce infrastructure costs.
Wikipeuia: Retiieveu on Nov 2u 2u11 - http:¡¡en.wikipeuia.oig¡wiki¡Softwaie_inuustiy
Thomson Reuteis: Bewlett-Packaiu Co acquiies ABB CABE Intl umbB,ABB CABE Au fiom ABB Coip
Ciunchbase - Bewlett-Packaiu: http:¡¡www.ciunchbase.com¡company¡hewlett-packaiu
Sun Niciosystems was a systems solution pioviuei that cieateu the Solaiis 0peiating System. Sun was acquiieu by 0iacle
Coipoiation foi 7.4 billion uollais in 2uu9.
BEC = Bigital Equipment Coipoiation. The veiy fiist miciocomputei manufactuiei, that latei penetiateu the softwaie
inuustiy with theii famous seaich engine Altavista.
Pwc: ulobal 1uu Softwaie Leaueis: Key playeis & maiket tienus. http:¡¡www.pwc.co.za¡en¡publications¡global-softwaie-leaueis.jhtml
See the glossaiy on the appenuix.
Extiacteu fiom Ciunchbase - About Niciosoft: http:¡¡www.ciunchbase.com¡company¡miciosoft
Extiacteu fiom Ciunchbase - About IBN: http:¡¡www.ciunchbase.com¡company¡ibm
Extiacteu fiom Wikipeuia - 0iacle Coipoiation: https:¡¡en.wikipeuia.oig¡wiki¡0iacle_Coipoiation
Fiom Ciunchbase - SAP - http:¡¡www.ciunchbase.com¡company¡sap
Ciunbase - ENC: http:¡¡www.ciunchbase.com¡company¡emc
Ciunchbase - Computei Associates: http:¡¡www.ciunchbase.com¡company¡ca-2
Ciunchbase - Apple: http:¡¡www.ciunchbase.com¡company¡apple
Ciunchbase - uoogle - http:¡¡www.ciunchbase.com¡company¡google
Fiom Bewlett Packaiu's website - http:¡¡www8.hp.com¡us¡en¡hp-infoimation¡inuex.html
BP Befines uo-to-maiket Stiategy foi Connecteu Woilu at Ameiicas Paitneis Confeience -
See the pievious iefeience.
See iefeience vI anu Pwc notes on the key softwaie inuustiy tienus
BP's Enteipiise Softwaie solution iostei: http:¡¡www8.hp.com¡us¡en¡softwaie¡enteipiise-softwaie.html - tab=S
BP Batabase Aichiving softwaie -
http:¡¡www8.hp.com¡us¡en¡softwaie¡softwaie-piouuct.html.comp0RI=tcm:24S-9S697u&pageTitle=uatabase-aichiving-softwaie - tab=1
See Appenuix 1S.4
Why BP is seiious about softwaie: http:¡¡www.eweek.com¡c¡a¡IT-Infiastiuctuie¡BP-Is-Seiious-About-Softwaie-2S-Reasons-Why-S8S9S2¡
0iacle: BP anu Siebel Case Stuuy: http:¡¡www.sciibu.com¡uoc¡S8u2267S¡hp-siebel-casestuuy
See iefeience XXIv.
See BP's most iecent 1uK http:¡¡hSu261.wwwS.hp.com¡phoenix.zhtml.c=71u87&p=iiol-iepoitsAnnual
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