Mar 11th 1999: Hewlett-Packard put online application services at the centre of its business strategy this week (Mar 9th) with the formation of a new Internet Business Unit to lead its "e-services" strategy.

The move is the centrepiece of the corporate shakeup first announced by CEO Lew Platt early last week (Mar 2nd). He revealed the computer vendor is to spin off its $7.6bn test and measurement division as an independent company, and will reorganise its remaining $39.5bn computing and imaging business to capitalise on opportunities created by the emergence of electronic services.

"The second chapter of the Internet will see the mass proliferation of e-services," Platt said in a conference call with analysts, which he said would include "application services such as pay-per-use software" and "outsourced computation, storage, printing or data mining," among other examples.

The new Internet Business Unit (IBU), headquartered in Cupertino CA, pulls together all of HP's Internet-related activities under the leadership of Joe Beyers, who early last year brought together various company initiatives to form the Internet Software Business Unit, the precursor of the IBU. Beyers has aimed to develop a more entrepreneurial culture that lets HP compete in the high-octane Internet business environment.

The new unit has five divisions: E-Services, Internet Security, E-Commerce, E-Business Solutions and HP's electronic payment subsidiary VeriFone.

An early example of HP's new-found empathy for Internet culture came in last week's (Mar 3rd) announcement that it will provide and operate the infrastructure for Ariba.com Network, an Internet-based trading network for business-to-business purchasing and sales.

In return for an exclusive hosting deal, HP has agreed to supply its equipment and services on a revenue sharing basis, the company's European electronic commerce portfolio manager Peter O'Neill revealed to ASP News Review last week. "That is the new business model for HP," he said.

The company was also likely to offer services on a shared risk and reward model to ASPs and ISPs, he added.

The Ariba.com Network will deliver content and transactions between suppliers and corporate users of Ariba's Operating Resource Management System (ORMS). ORMS aims to automate the enterprise procurement process for a wide range of maintenance, repair, and operating (MRO) supplies, capital equipment and services.

Participation will be free to ORMS users and for supplier catalogue hosting. Revenues will come from charges made to suppliers for the electronic delivery of commercial documents and for value-added services such as online auctions and promotions.