HP Sings New Tune, Builds Own House of Blues

In a move to build its application services portfolio,Hewlett-Packard announced it was acquiring Bluestone Software, a provider ofInternet software platforms, tools, and technologies. Through the $500 millionstock swap, HP will be adding Bluestone's Java 2 Enterprise Edition (J2EE) andXML application servers and tools in particular. These tools enable developersto deploy applications and services that take advantage of the emerging Webservices-based computing model, as well as new wireless capabilities. All of Bluestone's350 employees will become HP employees when the deal is completed early nextyear, but they will remain at Bluestone's Philadelphia headquarters.

HP has been concentrating on its e-services, centering arounde-Speak, which provides automated discovery and interaction between Webservices, as well as an "always-on" architecture supported byservers, storage, software, and services. "HP was always driven byproducts," said Carly Fiorina, HP chairman and CEO, at a recent industryconference. "Software was just seen as secondary, as a way to sell theproducts. Now it is it's own business." HP's goal is to provide"dynamically brokered services that will support the swarm of transactionsthat are going to be accessed by increasingly smaller and more intelligentinformation appliances."

To that end, Bluestone's J2EE and XML application servertechnology and Java transaction service will form the core of HP's middlewareoffering. The combined HP/Bluestones software will offer advanced XML,e-services, and mobile technology capabilities.

Another Bluestone product is Total-e-Server, a J2EE-basedapplication server. In July, Bluestone acquired Arjuna's Java TransactionService, an XML server that supports HP's ChangeEngine. HP's existing Internetsoftware portfolio includes integrated service management with OpenView, thesecurity software Praesidium, quality of service provisioning via WebQoS,high-availability software MC/ServiceGuard, the voice-enabling technologyOpenCall, Internet service tracking and billing solution Smart Internet Usage,and e-services integration technologies such as e-Speak and ChangeEngine. HPConsulting will develop a set of implementation and integration services insupport of Bluestone's technologies.

Some analysts think HP got a good deal with this acquisition,while saving Bluestone’s hide in the process. "We think HP grabbed a greattechnical bargain by timing its acquisition to coincide with Wall Street'spunishment of Bluestone for growing operational losses," relates a statementfrom Zona Research. "Bluestone's profuse bleeding is emblematic of alittle guy trying to establish a worldwide marketing presence overnight. Nowthat Bluestone's 80 sales professionals will become specialist resources forHP's sales-force hoards, they will be unlikely to hear customer rejectionsbased upon Bluestone being too small a player to consider."

The acquisition represents a new competitive threat for IBM, Sun,and BEA, the current leaders in the Web application server market. Zonabelieves this may be particularly bad news for BEA, an HP partner but directcompetitor of Bluestone. The componentware vendor's WebLogic application server"has been driven to the top spot in part by reference selling from HP'sworldwide marketing team. HP will still partner and reference sell WebLogic,but the acquisition of Bluestone gives HP its own first-class Web app server inBluestone's Total e-Business software, Arjuna's Java Transaction Service, andwireless technology that HP can use to disseminate a new generation of wirelessapplications tied into the HP OpenView monitoring system. Bluestone also has afull suite of Visual XML development tools, which HP will likely integrate intoits e-Speak services."

Bluestone recently began shipping version 7.2 of its Total-e-Server,which includes enhanced support for messaging, Web transactions, and mobileservices. Mobile enhancements to Total-e-Server -- dubbed Total-e-Mobileservices -- provide support for cell phones, pagers, personal digitalassistants, and other wireless devices. A feature called Universal SessionManager provides session and state management for mobile devices, as well asfor WAP Gateways that do not support cookies or other session managementtechnologies. Total-e-Server also includes a number of prebuilt,mobile-specific templates and tag libraries to format content for variouswireless device types.

Hewlett-Packard Co., Palo Alto, Calif., www.hp.com

Bluestone Software Inc.,Philadelphia, www.bluestone.com

Zona Research Inc.,Santa Barbara, Calif., www.zonaresearch.com