HP, Microsoft challenge IBM with new deal

Hewlett-Packard (HP) is strengthening ties to Microsoft to provide a broadened portfolio of business software products to the enterprise market, delivering a competitive blow to rival IBM.

Announced Wednesday, HP and Microsoft's joint $300-million, three-year investment to sell five different types of enterprise technology includes:

-- Messaging and unified communications, including e-mail, instant messaging and video conferencing;

-- Collaboration and content management, software that allows geographically-dispersed employees to collaborate on text, database, video and other files;

-- Business intelligence, the analysis of data to help drive business decisions;

-- Business process integration, which refers to the different processes enterprises use to run their businesses;

-- and core infrastructure, the management of an enterprise's computer systems.

The collaboration will generate 30 new products and services in the next year to 20,000 shared customers of the two companies.

"Our customers, when they are looking for these solutions, are eager for what it brings to them, but they also want it at a very attractive cost," said Ann Livermore, executive vice president of the Technology Solutions Group at HP, during a news conference.

Although HP, a maker of computers, servers and storage products, and Microsoft, a maker of operating systems and application software, have partnered for more than 20 years, the scale of this announcement makes it unique, said Livermore. "It pools Microsoft's whole portfolio to the enterprise and our whole portfolio...and that puts us in just a tremendous position."

"Customers want to hear: how can IT advance the business? How can IT drive value in the business? That's the nature of these five solutions that we have," said Kevin Turner, chief operating officer of Microsoft.

The combined market for business intelligence, collaboration, content management and infrastructure software is estimated at $49 billion in 2007 and the market for communications hardware and services is estimated approximately $60 billion, said John Gantz, chief research officer with IDC.

The HP-Microsoft deal gives both companies leverage over their joint rival, IBM, which also sells hardware and software to enterprises, said Rob Enderle, principal analyst with Enderle Group, a technology consulting firm. Although IBM hardware also runs Microsoft software, Microsoft is getting closer to HP, he said.

"Microsoft now views IBM as much more of a competitor going forward than a partner and it looks like they are shifting their attention away from IBM services and toward HP's," said Enderle.

HP is expected to surpass IBM in revenue this year. HP had $91.7 billion in its fiscal year, ended Oct. 31, while IBM is expected to end its year on Dec. 31 with $90.72 billion, according to a consensus from analysts polled by Thomson Financial.

"With HP now moving ahead of IBM, I think Microsoft feels comfortable partnering with HP more aggressively," Enderle said.

Current enterprise-level collaborations include HP support of Microsoft's new Office 2007 suite of business software and Exchange Server 2007 for data centers. HP provides technical briefings and proof-of-concept testing to customers and partners that are considering deploying Windows-based technology in their enterprises.

HP is also a Microsoft Gold Certified Partner for Learning Solutions, providing technical training on Microsoft systems at HP offices globally.