ITOM Drives Pending HPE/Micro-Focus Spin-Merge

The Hewlett Packard Enterprise IT Operations Management Summit, this week’s three-day event in Dallas, is over, but how the ITOM business will move forward when HPE’s spin-merge with is completed remains to be seen. The $8.8 billion transaction, which will earn a $2.5 billion cash payment and a 50.1% stake in the combined company, is expected to close August 31, at which time Chris Hsu, COO and Executive Vice President of HPE , will become the CEO of the new entity.

Recent Securities and Exchange Commission filings included details about HPE’s software business: total revenue in the 12 months through Oct. 31, 2016 were $3.17 billion and ITOM comprised 61% of the revenue. The rest of the portfolio changing hands were: Enterprise Security Products (18% of revenue), Information Management and Governance (16%) and Big Data Analytics (5%). Revenue for all products broke down to: 28% license, 9% software-as-a-service (SaaS), 50% maintenance, and 13% professional services.

While a pure-play software company offers ‘promise’, Gartner stated that adding HPE’s ITOM and ADM offerings to Micro Focus’ portfolio creates ‘significant, complex and uncertain overlaps’. Analyst Rob Enderle, who has been unimpressed with the performance of HPE and President and CEO Meg Whitman, called the software business the idea that ‘just hasn’t died a well-deserved death.’

Prior to the spin-merge Forrester Research analyst Glenn O’Donnell predicted that a software deal would play into the direction the company has taken since it separated from HP Inc. “Selling the software business fits in with the strategy of breaking into smaller pieces, which is the company’s plan now,” he said. “There’s a lot of merit in that position, as a lot of those software components are not necessarily at the core for them.”

There are no recent number for the ITOM market, but as of last July one survey put it as the largest component of the IT operations and services management market, and it was predicted to grow 7.5% annually between 2016 and 2024. The global ITOSM market was valued at $17.40 billion in 2015 and it is expected to expand at a CAGR of 6.5% through 2024 to reach $30.96 billion. In addition to HPE, key vendors include: IBM, Oracle, Microsoft, BMC Software, ServiceNow, VMware, Compuware, and CA Technology.

In March the company announced the release of Docker-certified ITOM monitoring solutions for on the new store, which was followed shortly after by the launch of four containerized versions of its ITOM offerings: Hybrid Cloud Management, Data Center Automation, Operations Bridge, and IT Service Management Automation. Incorporating built-in, open source container technology from Docker and Kubernetes, the four suites feature deployment, update and scale-out capabilities, and are expected to be updated quarterly, stated the company.

HPE has been dealing with many of the same issues as its customers, said Roy Ritthaler, VP of Product Marketing for HPE . In a recent conversation with IT Trends & Analysis he said they had to make their offerings easier to use, help them go faster, and help them transform. Last year they simplified their portfolio. “ is a big milestone in helping our customers go faster.”

Compared to a $3-trillion-plus IT market, the application container segment was worth a mere $762 million last year. However, while IT is creeping along at low single-digit growth, containers are experiencing a 40% CAGR, with expenditures expected to more than triple to $2.7 billion by 2020.

Ritthaler believes the spin-merger with Micro-Focus will go smoothly, and customers are “very comfortable” with HPE’s plans. “We have such a long history of working together.”

DISCLAIMER: Regardless of any reservations I may — or may not — have about HPE’s future, it continues to be in my investment portfolio.

Author: Steve Wexler

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