"[The Opsware acquisition is an] excellent move for the future of HP Software in terms of technology," says Jean-Pierre Garbani, a research vice president at Forrester Research. "How are they going to get their money back is a big question; let alone how they are going to make money."

The Opsware deal, expected to close by the end of HP's fourth fiscal quarter, would become the company's third-largest acquisition behind Compaq (about $24 billion) and Mercury Interactive ($4.5 billion). Industry watchers say the technology could help HP surpass competitors such as IBM and enable HP to deliver the broadest set of management, provisioning and automation capabilities today.

"This category of automation is incredibly strategic and powerful," Hogan said in a press conference. "Our view is that we have unmatched breadth and depth in our portfolio. We are not taking a back seat to anybody in this marketplace."

HP says that when the deal is completed the company will be able to offer Opsware's automated server provisioning, network device configuration management and run-book automation capabilities directly to customers. The companies had partnered in the past, and there is some overlap with technology HP acquired with Novadigm, but HP says it will hit the ground running selling Opsware, much like it handled Mercury -- which saw revenue growth in mature product categories such as load testing following its acquisition by HP.

Why Opsware

"HP Software now has a platform to bridge both the virtual and physical server and application infrastructures; enabling the provisioning, change and configuration management of both environments for large enterprise companies," says Stephen Elliot, director of Enterprise System Management at IDC.

Opsware technology automates server provisioning and manages virtual environments, components becoming more critical to managing today's more advanced data centers. The technology will also enhance HP's configuration management database (CMDB) technologies, offering capabilities to collect such data across heterogeneous environments.

"With Opsware, HP gains network-focused and storage-focused configuration databases that the company can use as data sources for HP's Universal CMDB," says Jasmine Noel, principal analyst at Ptak, Noel & Associates. "Now HP can claim to have the broadest set of CMDB data sources -- applications, servers, network and storage."

Automation technology is a hot area for management vendors right now. BMC recently acquired RealOps, and CA in June detailed how it would deliver "intelligent automation" in future products. By most accounts, Opsware led the data center automation market alongside BladeLogic, which recently filed for an IPO, and some say they expect to see BladeLogic capitalize on Opsware's billion-dollar asking price.

"I'd bet EMC and IBM are buying the CEO of BladeLogic lunch as we speak," says George Hamilton, director of Yankee Group's enabling technologies enterprise group. "It's hard to find a negative here for HP -- aside from the price they paid -- but the acquisition shows that HP realizes the battle isn't on the hardware side. It's about the automation and orchestration of all these virtual resources."

Industry watchers expect the integration of such automation technologies into broader management suites to redefine the management landscape as HP and IBM pull ahead of their fellow veteran management vendors BMC and CA.

"With this acquisition, the big four have been segmented. There is the big two of IBM and HP and the biggish two of BMC and CA," Hamilton adds.

Yet at $1.6 billion, HP paid a steep price for Opsware, which reported about $101 million in revenue for 2006. Timing could have pushed HP to buy sooner rather than later and pay more than the company's value on paper as rumors have been circulating that many vendors were looking at Opsware. Founded in 2002 by Marc Andreessen, Opsware evolved from a managed services business into a data center automation software provider. The company also built itself via acquisitions of iConclude, Rendition Networks and Creekpath Systems.

The pending Opsware purchase falls in line with HP's strategy to build its software business -- more than 20 software buys since CEO Mark Hurd joined the company in 2005 -- but with products from its Peregrine Systems acquisition and Mercury buys still not fully integrated, HP could be taking on too much software too fast. With somewhere between 200 and 300 products -- HP's now renamed OpenView portfolio had more than 100 applications alone -- some say that despite the value of Opsware software HP could be further complicating a software portfolio that the company says will help customers simplify IT management.

"Too many IT shops are struggling with legacy products for basic management functions such as network management, help desk and systems management," says Mike Peckar, an independent enterprise management consultant and principal of Fognet Consulting. "If these shops can't align their IT shops with these core applications, then more advanced enterprise tools such as those from Opsware and Mercury are not going to improve the average customer's bottom line."