HP-Opsware Deal Shows IT Automation Kicking Into High Gear

When Netscape founder Marc Andreessen launched Loudcloud eight years ago, he hoped to revolutionize IT by selling companies computing power on tap. But few CIOs were willing to give up their data centers.

Andreessen didn't become a Silicon Valley billionaire by ignoring the market. He sold the data center hosting business and reshaped Loudcloud into a provider of nuts-and-bolts automation software to help businesses manage their own data centers. Last week Hewlett-Packard agreed to buy that company--reincarnated as Opsware--for $1.6 billion.

The deal comes less than a week after systems management vendor BMC bought RealOps, a developer of software for automating IT processes, ranging from applying software patches to provisioning servers.

IT automation is gaining credibility, but it's been a long time coming. The concept's been around since the heyday of mainframes, and point products are available from large vendors such as BMC, CA, HP, and IBM, as well as from startups such as Opsware, BladeLogic, Opalis, and RealOps. But its impact has been minimal, largely because IT departments haven't gotten serious about it. Just 10% of companies use software for automating IT changes and configuration management, estimates Tom Hogan, HP's senior VP for software.

Visa is an example of how companies can change their thinking. Its new data center, which opened last year and handles $1 trillion in transactions annually, automates an array of processes centering on incident response and failover management. Using its own software and customized tools from vendors, Visa reduced its average time to detect and respond to an event like a network circuit going in and out of service from 20 minutes to one minute. The system knows what problems to send a person's way. "We've taken 500,000 alerts that were rolling across a technician's screen and reduced them down to 60 actionable events per day," says Rick Knight, senior VP of processing operations for Innovant, Visa's IT division.

Visa now resolves 92% of its networking and data-processing problems at the earliest of three levels of event escalation and response. Five years ago, automation was a management concept forced on administrators; now it's something the rank and file sees value in. Says Knight, "People have realized it's a way of doing business and a way to manage the complexity of the existing IT infrastructure."

Opsware's line of data center automation products, such as its Server Automation System and Network Automation System, offers the promise of smaller IT staffs. Savings also come from fewer mistakes, less downtime, and escalating only the toughest problems to IT experts. Getting those returns can mean investing $500,000 to $1 million or more in automation software, says IDC analyst Stephen Elliot.

HP's paying about 16 times annual revenue for Opsware, whose customers include Goldman Sachs, General Electric, JPMorgan Chase, and the U.S. Department of Defense.

Data center automation tools perform a variety of tasks that otherwise require IT grunt work. Some deploy, discover, and monitor applications. Others handle software patching, program maintenance, and hardware provisioning. In the past, data center automation required a hodgepodge of systems management and related tools. Now major vendors are trying to put together full automation portfolios.

TIME IS RIGHT
A lot of factors are coming together to drive greater interest in automation, not the least of which are data center consolidation and CIOs' nonstop pursuit of new efficiencies. More IT teams are creating standard processes, using frameworks such as ITIL, that make IT work easier to automate. Regulatory requirements can push them in that direction, too. "If you don't have the processes in place, it's very difficult to buy a tool," says Michael Tainter, a practice manager at infrastructure integrator Forsythe.

Some of the greatest benefits come from eliminating human error and allowing companies to focus IT people on strategic business projects rather than routine maintenance, Tainter says. Consolidation of automation tools under big system vendors will raise interest, he adds.

Automation is critical to IT departments trying to break the old 80/20 rule, where 80% of their budgets go to maintenance and only 20% toward new, innovative projects. HP CIO Randy Mott has made flipping that ratio a goal in revamping HP's internal IT operations. Last year, Mott outlined plans to consolidate 85 HP data centers to six and cut HP's IT staff of 19,000 in half. At the time, Mott said he would get there by leveraging data center automation tools. HP will use Opsware tools in that effort, Hogan said last week.

Businesses continue to wheel new servers into their data centers to meet the demands of Web commerce and of employees who expect 24/7 information access. Hogan estimates the cost of managing systems is ballooning at a rate three times the cost of the hardware itself, with server-to-administrator ratios as low as 10 to 1.

IT change management--the automation of tasks such as detecting when a software patch is available for a server, installing it, and ensuring that downstream systems aren't negatively affected--is the prime market HP is going after with Opsware.

Even among IT-intensive businesses, very few IT operations today could be described as highly automated. Complexity and constant change--from acquisitions, new technology, changing business demands--make it nearly impossible to put systems on cruise control. That's the case at Brady Corp., a precision manufacturer and printer that's doing basic automation such as restarting services that fail. So far, says director of IT Bentley Curran, "We haven't been able to achieve the benefits that automation has promised. Hopefully this will change in the future." Brady is exploring more sophisticated options.

PUSH IS ON
BMC chief technology officer Tom Bishop sees opportunity in all this--and "a sign of desperation" that HP paid so dearly to get into the market. BMC, which didn't disclose what it paid for RealOps, also recently bought incident management specialist ProactiveNet. "We have a number of the pieces already that HP was trying to acquire," says Bishop.

Yet BMC needs to plug holes in its portfolio to compete in a market consolidating around a few large vendors, Bishop concedes. Specifically, it needs storage management and network management products.

HP bolstered its infrastructure management lineup by acquiring Peregrine Systems for $425 million in 2005 and Mercury Interactive for $4.5 billion last year. CA's flagship Unicenter systems management platform includes tools for automating notification and problem escalation.

IBM's Tivoli data center management products are moving in the same direction. Tivoli's Provisioning Manager automates the provisioning of servers and virtual servers. Its Tivoli Monitoring optimizes the performance and availability of a business' entire IT infrastructure through a single portal. And its Virtualization Manager lets administrators discover, visualize, and manage both physical and virtual servers. IBM acquired Micromuse in 2005 for network management automation and MRO Software last year for asset and facilities management tools.

IBM is adding vertical extensions to Tivoli products. "Automation is becoming very industry specific," says Chris O'Connor, Tivoli's VP of strategy and marketing. For example, National Australia Group UK, a financial services company, uses a tailored version of Tivoli Access Manager to authenticate employee access to its mortgage application process and generate an audit trail, thus automating reporting for compliance.

IT services companies see themselves well placed to help customers put data centers on autopilot, choosing from the range of products. "We're able to take a holistic approach," says Ray Cline, VP for infrastructure services at EDS.

EDS uses Opsware for server provisioning and management and, as a result of a deal set to expire early next year, is Opsware's largest customer, accounting for about 20% of Opsware's $102 million in 2006 sales. There's a chance EDS will drop Opsware now that it's in the hands of HP, which competes with EDS in outsourcing. "In the normal course of business we will be looking at and reassessing that agreement," Cline says.

EDS may take a closer look at automation technologies in Microsoft's Systems Management Server and Operations Manager as an alternative, Cline says. But Microsoft can't fully replace Opsware at EDS, as its tools are designed first and foremost for monitoring Microsoft products. Cline also thinks there's a complication many technology professionals don't see coming as they move forward with data center automation: server virtualization, which many companies are using for server consolidation. Though automation vendors promise to make virtualization easier, Cline contends "it's still not possible to introduce a high level of automation into a virtualized environment."

Yet it's clear that some of the obstacles that have stood in the way of automation are falling. HP is recommitted to its software business, and automation will play a key part. With the Opsware deal, HP will have made well over $6 billion in software acquisitions under CEO Mark Hurd. (It agreed to buy Neoware, a thin client systems vendor, for $214 million last week.)

Another sign that HP sees a central role for automation: Opsware CEO Ben Horowitz will head HP's Business Technology Optimization group, which includes the Mercury Interactive assets.

IT leaders have reason to hope HP, IBM, BMC, and others can deliver on this vision for automating common IT operations. Automation may never be the "lights out," staff-free data center some envision, but it's looking like a more practical option than ever before.

-- with Richard Martin and Chris Murphy

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