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LAS VEGAS—Like other top-tier OEMs, Hewlett-Packard has been deeply involved in the services business for years, and it is becoming an increasingly important and profitable part of the business as revenues reach into the billions of dollars.

When HP opened its annual Technology Forum & Expo June 18, most of the talks and breakout sessions were dedicated to new technology—the company debuted several new “green” storage hardware and software products—and the implantation of technology such as virtualization. However, the Palo Alto, Calif., company is also looking to reconfigure how it handles services in the wake of its growth and acquisitions.

In the past years, HP has been buying up software companies, including Mercury Interactive, a $5.4 billion purchase that expanded the company’s management software offerings.

Now, after companies such as Mercury and Knightsbridge Solutions have been absorbed, HP has even more offerings to sell to its customers. And the spending to expand its technology portfolio is continuing, as evidenced on the second day of forum, when HP announced it would buy SPI Dynamics, maker of Web application security software.

Because of the number of options HP now has to offer, it is looking to reinvent the way it packages and offers its services, which has been a major theme running through this year’s forum.

In his keynote address, CEO Mark Hurd addressed the problem that HP has been dealing deal with since becoming so large—moving beyond its traditional roots as a hardware company toward more software and services. It has been forced to think of new ways to tackle its own internal infrastructure, while keeping its core customers up to date.

Nina Buik, president of Encompass, HP’s largest user group with 16,000 members, said HP’s expanding portfolio and additional services have led to some confusion among her members, although the group is working to bring feedback to the company.

The goal, Buik said, is to take concepts such as HP’s adaptive infrastructure technology and specifically spell out what the technology will mean for systems managers.

Click here to read more from CEO Mark Hurd’s keynote.

In a speech following Hurd’s June 18 address, Ann Livermore, executive vice president of HP’s Technology Services Group, said the company is working toward a model where its core products—servers, storage and services—will be leveraged to address any number of IT issues and concerns. One of those, HP’s adaptive infrastructure technology, looks to give IT departments a way to fully automate the data center.

Another offering, HP Secure Advantage, which the company unveiled June 19, looks to offer a wide range of security offerings, again using HP servers, storage, software and services. At the company’s HP Software Universe, which is being held the same week as the Tech Forum, the company also introduced several more pieces of software and updates meant to help IT managers improve efficiency in the data center.

Next Page: Services competition heating up.

At the same time, Livermore said HP will continue to push its advantage in storage products as well as its blade architecture, especially its BladeCenter c-Class systems.

HP is not the only company looking to expand its services offering to customers. IBM’s Global Services unit is similar in scope to HP’s own HP Services Group. And Sun Microsystems in the past two years has looked to expand its own services by leveraging its servers, storage and software products, while Dell is looking to use its knowledge of data centers to expand its service and consulting arm.

The numbers associated with services are impressive. HP reported $4.1 billion in services revenue for the first three months of 2007, while IBM reported $8.25 billion. Sun reported $1.23 billion for the same period. With its ongoing financial problems, Dell’s services revenue is difficult to calculate, although a Reuters report pegged the number at about $6 billion.

Click here to read more about HP’s plans for expanded data warehousing and BI services.

The challenge now for HP is convincing potential customers that its products can solve a wide range of IT issues. Livermore said that HP will provide services not only for its own products but also for its rivals’ hardware and software, as well as consulting services.

One way that HP plans on expanding services is to use its own internal infrastructure as a model of what can be done with HP hardware, software and services. Hurd highlighted this push during his keynote, telling the audience that “IT is an HP asset,” meaning that its best selling points can be found in its own data centers.

Deborah Nelson, senior vice president of marketing for the Technology Solutions Group, said HP is also delivering this message directly to its customers and through its channel partners. Like its own model, HP wants its customers to know that better management of the data center will not only reduce costs but will also add profit once the operations are streamlined.

“We want the people out there to know that IT can help drive business goals,” Nelson said. “There are three areas that we are focusing on. One is growing profitability, the second is reducing cost, and the third is mitigating risks.”

Some customers believe that HP is on track with this focus.

Worth Davis, director of IT operations for Suez Energy North America, an energy and natural gas business headquartered in Houston, said the company has been heavily invested in HP products for a long time and uses a range of hardware and software from c-Class blades and ProLiant servers with Advanced Micro Devices processors to HP’s storage EVA (Enterprise Virtual Array) models, to HP’s OpenView enterprise management software portfolio.

Although he has dealt with HP for some time, Davis said that it is difficult to keep up with the various software offerings that the company rolls out year after year. Still, Davis said, HP’s use of its own data center experience is a compelling story for customers.

“It not just HP, but all the large shops that have this problem,” Davis said. “In this case, you want the company to show all the tools and widgets that they have introduced and show how they can be implemented with new software. I think with HP services, any medium to large shop will buy into that. As for what HP is doing, I like the story that they have with their own data centers and what they are doing there. I think it’s legitimate.”

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