HP Acquires Consulting Firm to Boost Web-Services PresenceHP Acquires Consulting Firm to Boost Web-Services Presence

Hewlett-Packard today boosted its presence in the Web-services consulting and integration market with the acquisition of Extreme Logic Inc., a privately held consulting firm that specializes in the implementation of Microsoft .Net technologies for large enterprises. Specific terms of the all-cash transaction weren't announced.

HP officials say the deal helps them meet growing demand from customers in various industries who are looking to use Web services to connect their business software electronically with applications used by customers and business partners. "It's a very strategic deal for us," says Rick Fricchione, VP of enterprise Microsoft services at HP Services.

Web services represent a collection of open data standards--including XML, Simple Object Access Protocol, WSDL, and UDDI--that are designed to let disparate computer systems communicate without the need for expensive custom integration. Extreme Logic customer Ceridian Corp., an HR services firm, said it saved $12 million annually by replacing six applications with a single .Net application that can query all of its payroll databases.

The growing use of Web services within business IT departments is spurring competition among service providers anxious to tap a new growth market. Microsoft is attacking the .Net services market through Avanade, a joint venture company that the software maker formed in partnership with Accenture. IBM, meanwhile, is pushing its WebSphere application-integration software and services as an alternative to .Net. Offshore players Infosys Technologies Ltd. and Tata Consultancy Services also are rising players in the Web-services market.

Research firm Gartner values the market for .Net services at $7.4 billion and predicts it will reach $14.3 billion by 2006. HP's Fricchione says the Extreme Logic acquisition brings .Net-related revenue within HP from about $40 million to $85 million. He says he hopes to increase that to about $120 million in the next fiscal year.

While its acquisition of Extreme Logic enhances HP's technical competence in Web services and gives it some high-profile customers, some analysts believe the company needs to develop a stronger business consulting presence if it's to effectively compete against IBM. Says Technology Business Research analyst Humberto Andrade, "They need to be looking at an acquisition in that area as well."