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That Old Enterprise Software Business

This is an interesting time in the enterprise software market. The shift to the cloud is causing massive disruption, with storied old names struggling to reinvent themselves, and scrappy startups taking over the world.

One interesting story is that HP Enterprise, or HPE - one of the units that old HP split itself into - is looking into selling off some of its software assets. I am especially interested in one of these, namely Mercury, because I worked there for several years.

To recap, Mercury (née Mercury Interactive) was a leader in automated software testing. Its products covered functional testing (XRunner, WinRunner, QuickTest Professional), load testing (LoadRunner), and test management (TestDirector, later renamed to QualityCenter).

Basically what these tools let you do is to record a user interacting with an application, and then parameterise the recording - i.e. turn it into a little programme that you can replay, so that you can select different menu options and make sure that they all work, or simulate ten thousand users all hitting the app simultaneously and make sure it doesn’t fall down, or whatever.

LoadRunner in particular was the default standard at the time, dominating its market segment. I worked on the functional test products, but because of language coverage, I had at least basic familiarity with the whole product set.

In 2006, Mercury was trying to bridge that difficult chasm from $1B to $2B in revenue, but was caught up in a wider stock option backdating scandal. As its founder was exiled and the stock price cratered, HP swooped in and bought up the whole shop in a fire sale.

What happened after that is fairly typical of such acquisitions. Despite some big talk and high expectations, I think it is fair to say that the Mercury products languished within HP - or at the very least failed to evolve with any urgency.

This is unfortunately a pattern with technology acquisitions. There is often a honeymoon period, where increased funding enables delivery of long-awaited functionality, but the releases after that get hollowed out into maintenance releases, and even those start coming further and further apart, frustrating customers and insiders alike.

In the case of HP and Mercury, the slow-down was particularly unfortunate because the acquisition came just as enterprise application development was moving from proprietary protocols and GUIs to web applications talking HTTP. Mercury’s powerful and extremely customisable products were arguably overkill for simpler web applications, and a new generation of tools was beginning to emerge that was dedicated for that purpose. Given its singular focus on testing, and based on what I know of the company culture pre-acquisition, I am quite certain that an independent Mercury would have addressed the challenge head on and remade itself for that new world. After all, Mercury was fully aware of web applications, offering services that would simulate user access from locations around the world to have a continuous view on sites’ performance as experienced around the world.

Unfortunately, that’s not what happened under HP stewardship. The Mercury products languished in the Software group, which itself represented only around 2% of HP revenues. As often happens in such cases, much of the original talent left, creating a flourishing “alumni" network. I was part of that diaspora, so I can’t talk about the quality of their replacements, but there was certainly a discontinuity, and the Mercury tools never recovered their previous dominance.

None of this is to say that the acquisition was not a success by its own lights. HP still uses the Mercury technology in all sorts of places. Many enterprise HP customers did not move to the new technologies with any urgency, and therefore continued to have a business need for Mercury’s powerful tools. This means that the products still throw off enough stable and predictable revenue to make a private equity purchase potentially attractive

HP also adopted the Mercury notion of Business Technology Optimization, or BTO. This acted as a framework for many of HP’s other software initiatives, although it seems to have been abandoned more recently.

The failure of this acquisition is a failure of potential. What might an independent Mercury have become if the M2B project had been successful in taking it to $2B in revenue and beyond? What might Mercury have built in the world of the web and the cloud? As is often the case with these acquisitions, there is no way to know.

We do know roughly what the conditions are under which acquisitions succeed or fail. Arguably, the Mercury acquisition was more successful than most in no small part because HP kept the Mercury R&D centre in Israel, somewhat isolated from the rest of the company. This enabled the ex-Mercury staff to keep some sense of their own distinct identity, and keep developing their technology even after the acquisition.

There is an alternative view: that while isolation and even benign neglect may allow for survival of the startup within the acquiring company, they will not build true success. That requires a deeper integration of the startup's mentality into the acquiring company’s culture. Very few company cultures have the strength to be able to integrate a challenging outside vision without triggering an immune reaction of sorts.

The only way to integrate acquired companies - their technology and their culture - successfully, is to have strong executive guidance over a period of years. This has been a long-time failing at HP, to the despair of its longer-serving employees. In the absence of that guidance, benign neglect is maybe all that can be hoped for.

As one chapter ends, another begins

I haven’t blogged in ages - which is a good thing, I hasten to add! It’s just that I have been drinking from the firehose at my new gig. It’s now more than a month since I started at Moogsoft, and I think I can begin to talk about what it all means.

I joined Moogsoft from BMC, but it’s important to note that I did not join BMC, I wound up there as part of the BladeLogic acquisition. BladeLogic was my first startup, and it was a huge amount of fun, a great learning experience, and probably my period of fastest professional development to date. Before BladeLogic I was at Mercury, but I quit to join BladeLogic, due in no small part to the acquisition by HP1.

What is BladeLogic?

Both BladeLogic2 Operations Manager (BLOM) and Incident.MOOG are innovative products in their place and time. BladeLogic, together with Opsware, redefined what server configuration management meant, and both companies went on to be acquired by larger “Big 4" IT vendors: Opsware by HP, and a year or so later, BladeLogic by BMC.

For a while both products thrived in their new environment, but in the last few years, both have been flagging. There are many reasons for this, from internal politics at both BMC and HP acting as distraction, to the rise of open-source configuration management tools such as Chef and Puppet. However, I wonder if those tools were simply the end of an era.

This is a known pattern: technologies reach their peak right before they get displaced by their successor technologies. The speed record for steam engines was set in 1938, but a diesel engine had already exceeded that speed in 1936, and by the 1950s diesel locomotives were well on track to replace steam traction3.

This pattern even agrees with disruption theory: investment continues in the old technology, but it simply becomes overly complex and uneconomical compared to simpler, (initially) low-end competitors.

Pets vs Cattle

This disruption is exactly what I see happening now. The BladeLogic model of painstaking management of single servers is still relevant, but mainly for legacy or specialised systems. Much new-build development is already moving to disposable or even stateless VMs or containers, according to the classic “pets vs cattle" model.


In this brave new world, there is very little need to worry about the configuration of your “cattle" containers. Something like BladeLogic is arguably overkill, and users should instead focus on their provisioning process.

Of course it’s not quite as simple as that. Cloud zealots have been talking about replaceable short-lived cloud servers for a while, but it hasn’t really happened outside of some rather specific situations. The lifetime of VMs in the cloud has often ended up being much longer than this model would suggest, meaning that there is plenty of time for their configurations to drift and to require management in place. Part of the reason for this is that management processes and techniques that are still based on the paradigm of a persistent physical server. Much of this Weltanschauung has been adopted wholesale for virtual and cloud-based servers without much reconsideration.

There is also the topic of security and policy compliance to be considered. Given long system lifetimes, it is not sufficient to be able to validate that something was deployed correctly, as its configuration may have drifted away from that known-good state. The desired state may also change as vendors release updates and patches, or new security vulnerabilities are disclosed. In all of these cases, some mechanism is needed to check for differences between the current live configuration and the required configuration, and to bring the system into compliance with that desired state.

However, this is now. As Docker and other container-centric infrastructure technologies become more prevalent, and as business functions continue to migrate from legacy to new-build applications, I would expect that that paradigm will evolve to replaceable plug&play infrastructure components, and do so everywhere, not just at the “unicorn" companies.

What does it all mean?

Lots of smart people are working hard to enable infrastructure to be managed as code. One of the characteristics of code is that you don’t change it in production, you develop it offline, then release it and don’t change it until you overwrite with a new version. The big variables that I think will affect the speed of the transition to this new model are firstly, the rate of replacement of legacy applications, and secondly, the evolution of IT management processes and culture to take advantage of new tools.

BladeLogic itself has the opportunity to evolve to have a role in the new model, of course. Regardless, BladeLogic was a huge part of my career development - and just huge fun, if I’m honest - so I will be watching development of the IT infrastructure management market intently, but no longer from the front lines.

  1. I’d say my fears on that score have been amply borne out. 

  2. The Wikipedia entry for BladeLogic now redirects to BMC, which is not especially helpful. 

  3. Sorry - not sorry.