HP is poised to make more of its software available to customers as web-based services, following an announcement earlier this month that it is forming a new division dedicated to software as a service (SaaS). The move sees the vendor tapping into the service delivery expertise it gained through last year’s purchase of Mercury Interactive.

Initial SaaS offerings across its Business Technology Optimization (BTO) portfolio will be based on the service management and change control applications offered by HP’s Mercury subsidiary. But HP also plans to extend its SaaS model to SOA and governance, web application security assessment and systems management tools that it gained through its acquisitions of SPI Dynamics and Opsware, and also to parts of its flagship OpenView systems management platform.

HP is due to merge its OpenView Service Desk software with Mercury’s Service Center package in the next release, with a SaaS version expected to follow.

“All of that software can be delivered on the premise or as SaaS. If you look at OpenView, for example, all the data collected from devices can be integrated into back-end business services management,” said HP vice president for SaaS, Marc Olesen.

The SaaS division will have its own research and development budget, which will be used to work out how existing HP applications can be integrated into Mercury’s application delivery platform. Olesen pointed out that Mercury has been delivering SaaS to 670 customers over the past seven years.

“We have a dedicated organisation that is delivering SaaS, including operations engineers who are closely aligned with the software division’s R &D. We want the right integration when customers are placing service fulfilment and configuration requests with us, and to take responsibility for support and maintenance,” Olesen said.
David Bradshaw, principal analyst at research company Ovum’s software group, said that it is important for HP to offer its customers the choice of either traditional on-premises or SaaS-based software licensing. But he said SaaS cost savings are not guaranteed.

“If you compare equivalent business applications, the cost of Salesforce.com, for example, compared with equivalent on-premise application software, the cost of Salesforce.com will look expensive over a three-year lifetime. But when you consider what you are not paying for, it can look cheap ­ it really varies and depends on what you have already,” Bradshaw said.

But Olesen said SaaS would make economic sense to many firms. “I do not know if SaaS is cheaper, but certainly the upfront costs are reduced because you are not buying a perpetual licence and total cost of ownership is typically reduced,” he added.

Bradshaw argued that from the infrastructure side at least, HP is not as late into the SaaS market as many think. He added that the firm’s relatively cautious approach to SaaS probably reflects uncertainty about the potential size of the market. “SaaS could represent up to 40 per cent of the entire software market long term, but it is difficult to forecast: so much depends on user perspectives, enterprise economic cycles and what is already being offered in the market,” he said.

HP software available via SaaS today includes Business Availability Center, Quality Center, Performance Center and Project and Portfolio Management Center.