Mature Software Is Hard: HPE Looking to Divest?

Rumors are HPE is looking to sell of some older software assets, Autonomy, Mercury, and Vertical. Acquisition prices from Bloomberg:

  • Autonomy: $10.3bn in 2011
  • Mercury: $4.5bn in 2006
  • Vertica: ~$350m in 2011

It’s that bugbear cloud, James over at RedMonk, said back in June in his report on the company’s big conference:

Make no mistake – Cloud is a forcing factor for pretty much all of the issues facing incumbent enterprise suppliers today. Cloud is putting pressure on all enterprise software markets – applications, hardware, networking, security, services, software, storage etc.

That said, I’d theorize that these are all reliable businesses with reliable customer bases. Their revenue may be declining and they may not be all “SaaS-y,” but for the right price PE firms could probably do alright.

Being a mature software company now is hard: you have billions in revenue around very old products and all this pressure to change to lower priced, different delivery mechanisms. See Escape Velocity for an excellent treatment of this topic and some suggested treatments.

Going forward, software strategy probably needs to think about that retail mindset: how can we make this cheaper each year, and yet “new” enough that customers keep coming back. Either that, or providing new, high value software that you can charge a premium for. That means new R&D, new apps, and new usage and buying patterns for the customers: all very hard (but not impossible?) things to do with mature software portfolios.

While starting from scratch and zero revenue isn’t easy, it’s possible and maybe even easier than sustaining mature success. The other problem is that investors prefer to stash their cash in (buy stocks) higher growth companies; so even if mature software portfolios are doing “well,” they’re not preferred relative to high growth, even profitless new companies.

It’d be fun to do a big analysis of all these gut-feels of mine with public financial data: I wonder if intuition would pan out.

(It’s also delightful to read James’ take on HP hiring Léo as their CEO back in 2010.)

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