Market for e-Business : Case of “HP Exists e-business Software Market (July 15, 2002)”

HP in the past two years has made a big push into the e-business software market to better compete against its two principal rivals, IBM and Sun Microsystems, high-end computer makers that have more extensive software portfolios, but since then decided to discontinue the core pieces of its NetAction product line, which in included application-server software designed for Web transactions, and related software for building Web services, technology that allows companies to interact and conduct business via the Internet.

Back to the history, HP spent $470 million in October 2000 to acquire Bluestone Software, a small company that competed against IBM, Sun and Oracle, to build up its application server software arsenal. However, its turn out that the HP owns only 4 percent of the application server market, far behind market share leader of BEA and IBM.

Peter Blackmore, executive vice president of HP's enterprise systems group, said the company has suffered heavy losses with its own e-business software. He says that many of the assets HP has will be given up. As quoted, Blackmore says "We move to a partnership model and then make that part of the business, avoid the losses we have and make the overall software business profitable."

HP will refocus its software strategy on three technologies that manage software: HP OpenView, used to manage and monitor the health of businesses' computer systems; HP Utility Data Center, used to simplify management of sprawling data centers; and HP OpenCall, used by telecommunications service providers to offer telephony and Internet services to customers

As from the case of HP, we could relate the failure with the theory exposed below. The market analysis include the thorough understanding about our customer: who they are, their characteristics, and why they are likely to buy from our business. The process of writing the market analysis requires you to define your target markets and analyze how we will position our product or service to arouse and fulfill their needs in order to maximize sales.

In a full-scale business plan the market analysis is part of the marketing plan section, which includes:

• Market analysis: a definition and description of prospective customers, including target markets, size and structure of the customer base, and growth prospects.
• Pricing strategy: setting the price of the product or service based on methods such as cost-plus pricing, demand pricing, and competitive pricing; and the use of innovative pricing strategies such as penetration pricing, flexible pricing, and market skimming.
• Promotion plan: the communication channels you will use to make the customer aware of your product/service and convince them to purchase (e.g., advertising, on-line demonstration videos, packaging). Promotion also includes tracking your customers (e.g., confirming who are your customers and how did they hear about you) and encouraging them to purchase again.
• Distribution plan: the distribution channel you will use to move the product or service to the customer (e.g., direct sales, wholesale distributors, brokers) and, if necessary, back again (e.g., returns).
• Demand forecast: estimates of product or service sales, based on the market analysis and assumptions about the effectiveness of the pricing, promotion, and distribution strategies.

However, HP failure to enter the application server market could be one or some of those reasons. It is quite clear that HP did a lot of great research and development, but had failed to transfer the technology from the lab to the field. Even though HP acquired good technology, but as a hardware company, it is just did not work to try to drive out software infrastructure. Often it is best to focus on our core competency.