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SHANE ROBISON
Keynote address
Software 2005
Santa Clara, California
April 27, 2005
© Copyright 2005 Hewlett-Packard Development Company, L.P.
All rights reserved. Do not use without written permission from HP.
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Thank you, and good morning everyone.
Many of you may be surprised to see HP all over the agenda at an enterprise software conference. Yesterday, Russ Daniels, our CTO [chief technology officer] of Software and Adaptive Enterprise, was here. And today you'll have the opportunity to hear from Martin Fink, who runs HP's Linux business, and Dick Lampman, who leads HP Labs.
There's a good reason for our presence here today. I'm going to talk you through a story - the story of how a global IT company, long known for its innovation in hardware and global services, is focusing more of its efforts on enterprise software.
Overall, HP has a $3 billion enterprise software business today:
- We're a leader in network and systems management software with our OpenView and Systems Insight Manager portfolios.
- We're the leading provider of carrier-grade platforms for developing next-generation voice, data and converged services with OpenCall.
- We're a leading provider of business and mission-critical operating systems, including HP-UX, OpenVMS, NonStop and Linux.
- We provide clustering and high-availability software that keeps our customers' systems running and secure.
- And we offer a broad portfolio of storage and networking software.
In other words, software and the solutions we deliver to customers - whether they're from HP or our partners - are an important and growing part of our business.
A few years ago, we looked at the IT and enterprise software landscape, and it became clear to us that the challenges faced by our customers required new thinking and new approaches. At that time, HP's software portfolio was admittedly, unfocused. The company had been performing "random acts of software," as Nora Denzel, the head of our software business, likes to say. We had some incredible software assets, but we were at a crossroads. We had to decide if we were going to get serious about enterprise software. We had to have a point of view on how we were providing differentiated value to our customers. We decided to focus our strategy, listen carefully to our customers, and bet on some key areas in enterprise software.
Customers told us that they had plenty of applications and middleware and databases. They said they needed solutions that would integrate their business processes, applications and IT resources, that would enable them to understand and act in real time on business and market information - systems that would automate routine IT operations. They needed software to help them manage their business and IT operations, but with an approach that didn't lock them into any one vendor.
In other words, they needed a next-generation IT architecture that would make them more agile and flexible - an architecture that would enable them to synchronize business and IT to capitalize on the change in their industries.
This is the heart of HP's vision for the Adaptive Enterprise. It is the foundation for the investments we're making in software. And it is the reason that we focused our strategy and have doubled down on management software.
Flexibility is key
A lot of people assumed we were getting out of software when we divested Bluestone. But they were wrong. We were just increasing our focus. And we knew we were on the right track last year, when Gartner asked CIOs what their top 10 technology priorities were. Managing a flexible infrastructure ranked No. 2 on their list - four places higher than total cost of ownership.
Management software has moved beyond basic monitoring and reporting. The way we see it, management software will become as important to the enterprise as the operating system was to the PC. You heard about this from Russ Daniels yesterday, but the notion of software as a service, service-oriented architectures, utility models and grid, they're really all about the same thing: managing complexity, enabling common languages through open industry standards and improving your business through virtualization and automation of IT-based services.
Now in that context, here's why our strategy is different. We focus on open, distributed software systems. We believe the future will be built on service-oriented architectures, grid and utility service models - not on vertical stacks of proprietary middleware, applications and databases.
Our strategy is to focus our innovation in management software. We'll invest in areas where we can make a difference and partner for the rest. And when I say make a difference, I mean creating value and solving our customers' toughest problems. Of our overall R&D spend in the enterprise, we've really ratcheted up our investment in management software - in terms of our six acquisitions as well as investments in the new products pipeline. Our research agenda in HP Labs is increasingly focused on next-generation software solutions as well as new approaches to promising but challenging areas such as grid architectures and utility services. And we're making a significant investment in support of open source software and the open source community-as you'll hear from Martin later today.
Market trends/market view
Let's step back and take a market view. Specifically, let me break down the three market trends that we believe will not only transform the way companies manage information technology but also the way they do business:
- The first is service-oriented architectures and the delivery of software as a service.
- The second is the growing importance of management solutions that enable companies to automate and virtualize more of their IT operations and integrate their business processes, applications and IT resources.
- And the third is the commercialization of open source software.
SOA and software as a service
Let's talk in more detail about service-oriented architectures. The industry has been talking about SOAs for the last decade or more. We've had some experience with that at HP.
About six years ago, we developed an approach we called "e-speak," which was a platform for delivering e-services. But our customers weren't really ready for it. During the past couple of years, however, Web services have given many companies an entry-level experience with service-oriented architectures. As a result, customer interest in a modular, service-oriented approach to information technology is growing fast.
Because an SOA is a set of loosely coupled components that can be invoked independently and whose interface descriptions can be published and discovered, enterprise customers can reuse shared services, improve interoperability across systems, and automate business processes. The grid is a good example of what I'm talking about because it is a strategic enabler for service-oriented architectures.
HP's grid strategy centers on the management and execution of grid services. What that means to us is being able to render almost any element in the IT environment as a grid service. A computer, storage, printer, even personal and handheld devices, can be rendered as grid services. So can applications, data files, databases or records in a database. And once these IT entities are rendered as grid services, then the grid infrastructure will allow them to be registered, discovered, provisioned, shared, removed, managed, monitored, metered - or even billed for.
Within a service-oriented architecture, software itself will become a service to the enterprise. Customers will be less concerned with features and functions than with ease of use, ease of integration and utility-based pricing schemes. Traditional software stacks will become less important as software shifts to modular, reusable components that can be discovered and invoked. Today's license-based model for enterprise software will give way to new models for deploying and paying for software as a service.
IDC last year conducted a study on the future of software licensing and found that 73 percent of software vendors and 70 percent of customers though it was highly likely that by 2010 the majority of worldwide software revenue would be derived from subscription-based offerings of software as a service.
Building service-oriented architectures isn't easy. And delivering software as a service is still on the leading edge. So even though this isn't going to happen over night, as CIOs experiment with Web services or begin pilot deployments of grid services, they are starting to see the potential payoffs in greater flexibility, faster and cheaper integration and an increased focus on supporting business processes.
Our objective at HP is to focus on solutions that will help businesses realize the advantages of service-oriented architectures. It's about a lot more than just their functionality. Its about cost, change and configuration, maintenance and management and security. All of these things are vital to successfully implementing an SOA.
Management software
That's why we've focused our efforts on management software rather than on software stacks like middleware and messaging technology.
As I mentioned earlier, HP isn't new to management software. Our OpenView and OpenCall products are industry leaders. OpenView, for example, is used by all of the Fortune 50 companies. And OpenCall enables the world's top 200 communications service providers to deliver voice, data and multimedia services to hundreds of millions of subscribers. But again, for some perspective, let me go back a couple of years in our story.
We decided to double down on management because we had the foundation to solve our customers' problems. We announced our strategy to refocus management software from the process of collecting management information to the process of converting real-time data into insight that enterprises can act on to better serve their changing business needs.
The reasons behind our shift were actually pretty straightforward. In an adaptive enterprise - in a service-oriented architecture - management software is a lot more than just collection and presentation of data. To begin with, it has to answer the question, So what? What does this mean for my business? For example, if the software detects poor performance on a customer order — entry site, you want to know what impact that is having on your business.
Second, management software needs to integrate information in an intelligent way so that customers can make decisions more quickly. And third, it needs to fix the problems it sees automatically - such as immediately shifting server capacity to that order-entry site to increase performance and meet customer demand.
That's what our management software strategy is all about - to automate and integrate. As a result, IT becomes an agile and flexible service to the enterprise, rather than a cost center and a barrier to change.
The trouble is that most IT organizations spend 70 percent or more of their IT budgets on infrastructure and application maintenance. It's labor intensive. It's error prone, and it's costly. They spend less than 30 percent on infrastructure and application innovation. We want to help CIOs flip that ratio.
The key to doing that is automating as many tasks as you can. That way, you can reduce the number of people it takes to manage infrastructure and applications. You can increase utilization rates, making IT more efficient. And you can devote more of your resources to innovation and building a competitive advantage.
In our strategy, we decided that the best way to deliver these capabilities was through a combination of innovation, acquisitions and partnering. Last year we built on our own innovation to deliver a new tool for business service management called OpenView Business Process Insight - the first software in the industry to monitor the health of business processes and express the impact of IT in business terms.
But we can't do everything ourselves, so we also looked for companies with technology that fills important gaps in our management software portfolio. So far, we've acquired six companies in areas ranging from automated change and configuration to identity and access management to Web services and SOA management. Two of those acquisitions - Consera and Novadigm - enabled us to deliver HP OpenView Automation Manager, the first automation product to use critical business performance information to allocate IT resources. It automatically optimizes the configuration of systems and applications to match predefined service levels.
We also acquired technology from Baltimore Technologies and TruLogica. And those have enabled identity and access-management solutions. These are essential building blocks for assured security management in a world of highly distributed computing and IT.
Through our identity management solutions, we provide centralized control of who has access to what information and what resources, and we manage the lifecycle of the identity itself. This is particularly important for business agility and adaptability. As new services and resources are deployed, you have to make sure the right people - and only the right people - have access to those services.
As result of our acquisitions, investments and partnerships with leading companies such as Oracle, Microsoft, SAP, BEA and others, HP is delivering management solutions that enable our customers to integrate people, process and technology to run IT as a business.
Open source
Let's talk about open source. In addition to service-oriented architectures and management solutions, we believe that one of the most far-reaching disruptors in enterprise software is the commercialization of open source software. Notice I didn't say Linux. While Linux has dominated open source, it's not just about Linux anymore. But Linux kind of led the way.
Now, open source software is maturing to the point that it is moving up the software stack. It is penetrating all aspects of enterprise software, from operating systems to middleware and even to applications. Open source middleware like JBoss and database software like MySQL are gaining enterprise customer acceptance and co-existing with commercial software from BEA and Oracle.
A recent survey of IT departments by Information Week found that 60 percent have a mix of commercial and open source software. Only 38 percent are running exclusively commercial software. Although HP believes that open source software will continue to penetrate deeper into the enterprise, we do not believe that customers will deploy all open source or all commercial software. The successful companies will be those who embrace both - and who understand which one works best in any given situation. We believe that a pure open source business model does not have the long-term sustainability of a hybrid model, which is closer to the way customers implement complete solutions for their business challenges.
To help our customers deploy, operate and support open source software in a mixed environment, HP created the Linux Reference Architecture. It's an architecture that draws on a broad portfolio of open source and commercial software, plus industry-standard building blocks. With it, we can deliver a blueprint for open source software solutions that meet enterprise customers' business requirements. This architecture builds on our own experience deploying open source software within HP.
Together with a comprehensive array of consulting, integration and support services, we're able to remove the key risks associated with implementing Linux-based technologies. Just to give you an idea of the scope of our commitment, we have:
- More than 6,500 trained service professionals worldwide who implement, support and help manage Linux and open source projects for our customers
- More than 150 products that ship with open source software embedded in them
- And more than 50 projects HP has initiated in open source software
If you want to hear a lot more about our open source strategy, make sure you attend Martin Fink's talk later today.
R&D
So let's talk about innovation and R&D. As I look ahead at the future of enterprise software, one of the biggest opportunities I see is using innovative software to unlock the value of information within a company. Sometimes that information is locked in large storage systems. But other times it is represented by the accumulated experience and knowledge of a company's employees.
Dick Lampman will talk in more detail about HP Labs and our software research activities later today. You should really attend that one, it will be very interesting. And Russ Daniels highlighted a few other research projects yesterday. It's all great stuff and all aligned with our strategy. But in the interest of time, I just want to highlight a few of the things we're doing.
One interesting area of research for us is information services. That's a fairly generic term, but the idea is to use software to break through all the clutter and cognitive overload in our information-saturated world and find only those things that you care about. HP, for example, has created an archiving solution that allows a company to search all of its archived e-mail, including attachments. This is particularly important in an age of strict compliance and regulatory requirements.
Another key project is focused on using business analytics and optimization to improve the efficiency of large-scale transaction processing. HP has been using online auctions as a key part of our procurement process. We have the largest supply chain in the IT industry - over $50 billion a year in procurement. Through economic modeling and simulation, we were able to do auction forecasting as well as learn how to structure auctions to produce the best prices. The result has been a savings of more than $700 million for HP.
HP is also doing software research in the emerging area of social networking software. This is all about capitalizing on knowledge management within an organization. We're using this technology to predict future business outcomes. For example, HP researchers identified a group of finance managers in one of HP's businesses and gave them incentives to make their best forecasts. By aggregating the individual predictions and plugging them into a mathematical model, the research team produced a forecast that turned out to be highly accurate - more accurate than the best of the individual participants.
We're now applying these tools to forecasting in other parts of HP's business. The point is, we see competitive business advantage in researching and developing smart software that helps companies to tap into, model and manage the information, knowledge and expertise that their enterprise accumulates every day.
Unlimited opportunities
I don't think there's ever been a more interesting or exciting time to be in enterprise software. The opportunities to use software to transform business and IT are unlimited.
As I said at the beginning of my story today, HP had come to a crossroads in enterprise software. We could follow conventional wisdom and stay at the infrastructure level. Or we could listen to our customers - build on a solid foundation of great technology assets, of focused innovations and acquisitions - to realize a new future in enterprise software.
We believe that future will be built on service-oriented architectures, grid and utility service models. It's a foundation that will be open and based on distributed computing and software models - not vertical stacks of proprietary software. It will require management solutions that enable companies to shift more of their IT investments from maintenance to innovation by automating and virtualizing IT operations and integrating their business processes, applications and IT resources. It will rely on the strengths of both commercial and open source software, enabling companies to be more efficient and more agile. And finally it must be able to capture and distill whole new categories of information that enable competitive advantage.
We look forward to working with all of you and our customers to define and build that exciting future. Thank you.
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