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A Winning Combination: Software-as-Services Plus Business Consulting and Process Services
By Laurie McCabe
January 30, 2004

Hewlett-Packard (Quote, Chart) Wednesday said it will acquire Talking Blocks, a privately held Service Oriented Architecture (SOA) and Web services management software company based in San Francisco.

Founded in 2000, Talking Blocks boasts such marquee integration partners as IBM (Quote, Chart), Microsoft (Quote, Chart) and Netegrity.

When the all-cash deal is complete later this month, HP said Talking Blocks products will be available through HP OpenView software channels and sold by HP’s Enterprise Systems Group and HP Consulting and Integration Services. Exact financial details of the transaction were not disclosed. HP did not say how many of Talking Blocks employees would be offered to transfer over.

The Palo Alto, Calif.-based computer and printer maker says the acquisition is part of its “Adaptive Enterprise” strategy, which gives data center operators immediate knowledge of what is going on in their systems, such as notifying through alerts that a storage device is getting full or a server is offline.

“Talking Blocks is giving more visibility to our strategy,” HP Software Global Business Unit senior vice president Nora Denzel said during a conference call to reporters. “It lets IT managers figure out things like ‘What is my order to cash cycle? or How many people are coming to my Web site but not buying because the site is taking too long?'”

The company said its new relationship with Talking Blocks would not impact its relationships with partners BEA (Quote, Chart) and TIBCO.

HP’s Adaptive strategy competes heavily with IBM’s “e-business on-demand” strategy as well as N1 from Sun Microsystems (Quote, Chart), which acquired Terraspring to help develop the platform. HP was a major investor in Terraspring.

Denzel conceded that there is a trend in the industry to tap into as many sources as possible to compete in the online provisioning sector.

“We are always looking buy, build or partner on IP based on how fast we need it,” Denzel said. “I don’t think it would be uncommon to say you will see more and more announcements like this in the future.”

Some of HP’s purchases are already in place. Last month, the company acquired Extreme Logic, which specializes in the Microsoft .NET architecture. Back in July 2003, HP bought the identity management assets of Baltimore Technologies to help pad its Adaptive portfolio.

The acquisition also reduces the number of players in the dedicated Web Services management space. Surviving vendors include Actional, AmberPoint, Blue Titan, Confluent Software, Digital Evolution, and Flamenco Networks, each of which is gaining traction in the market with its own unique approach to management.

ZapThink analyst Jason Bloomberg predicts some additional consolidation among these vendors before the dust settles.

“HP’s acquisition of Talking Blocks signals the expected consolidation of the Web Services management space, as well as HP’s move to become one of the leaders in this growing market segment,” Bloomberg told internetnews.com. “HP is clearly looking to become the dominant Service-Oriented Architecture enablement vendor. Enabling SOAs is the most important function of a Web Services management platform, and among established vendors, only Computer Associates is positioned at this time to give HP a run for its money.

Bloomberg said ZapThink also expects IBM Tivoli and possibly BMC to join HP and CA as the established leaders in this space.

The acquisition also helps pad HP’s Web services strategy. The idea is to connect Web and legacy services, and, ultimately, the services and systems that comprise business processes. The company also said it would use Talking Blocks’ technology to help it support XML, Java, .NET and CORBA for its Web Services Management Framework (WSMF), which is under review by the Organization for the Advancement of Structured Information Standards (OASIS) standards body.

The announcement comes on the same day that HP CFO Robert Wayman said the company should meet its quarterly numbers when it next reports in October. During its last quarterly report, HP said its revenue for the fourth quarter would grow between 8 percent and 10 percent beyond the third quarter’s $17.35 billion.


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