HP’s decision to enter the airline reservation business by purchasing Open Skies grounded the airline segment in the 3000’s targets for new system sales. But HP 3000 division (CSY) general manager Harry Sterling reported that customers can expect new verticals to replace the airline segment — now that HP is selling transactions instead of systems that will run Open Skies software.

HP is building a large datacenter in Colorado to deliver the processing capabilities to airlines, moving to run HP 3000s on behalf of the air carriers. This shift to selling transactions has eliminated airlines as a market for selling new 3000s.

“In terms of some of our business practices, we tend to be pushing the edge of the envelope [in HP],” Sterling told customers at a recent Customer Forum in Dallas. “We are trying new things and piloting new processes within the company.”

HP had established target verticals in July for the credit union, healthcare, manufacturing, direct marketing and airline industries. CSY’s purchase of Open Skies on October 22 removed airlines from its field of focus for new system sales.

Alfredo Rego of Adager commented on the acquisition during a stop on his North American tour in November, noting the historic nature of the deal.

“This is a very meaningful and bold move for the HP 3000 division,” Rego said. “It’s the first time in the HP 3000’s 25-year history that the HP 3000 division has bought an applications provider. They have bought applications before, but not a provider like this with an aggressive strategy. It shows the strength of that division within HP. CSY’s outstanding profitability certainly helps.”

Rego said Open Skies owner Dave Evans reported that American Airlines’ Sabre Group communicated with Evans after the deal and said they would have paid twice what CSY paid for the company. The reservations technology will let Open Skies software dominate in overseas markets with special character needs, places where older 6-bit systems run by Sabre fall short.

“I predict that Open Skies will make American Airlines suffer a little bit,” Rego said. “There are thousands of regional airlines growing up so quickly, and they can become competitive. If they don’t have to buy their systems from American Airlines, that’s going to be fascinating.”

Pat Maley, president of HP 3000 distributor Client Systems, said the deal creates a new stream of business for the HP 3000. It also gives CSY general manager Harry Sterling two organizations to report to, Maley said.

“For CSY he works for [Enterprise Server Group general manager] Bill Russell, and for Open Skies he works for [Enterprise Computing Solutions Organization general manager] Ann Livermore,” Maley said. “His job is to take Open Skies to the next level over the next year.” Maley also said folding Open Skies into CSY helps promote “the idea that [the 3000] is not old technology bogged down by COBOL spaghetti code.”

HP considered working with Open Skies as a result of customer requests “saying they really did not want to be in the business of running a datacenter,” Sterling said. Existing airlines who have purchased and operate HP 3000s are now coming to CSY to have their reservation systems changed to the transaction business model.

“We’re basically forming an information utility,” Sterling said. “You’ll hear a lot more from HP over the next year or so about information utilities. We’re the pilot in HP’s understanding of this business model.”

New vertical targets

Sterling explained that removing airlines from its vertical target list “doesn’t mean it’s not a priority for us, but it’s taken on a whole new meaning.” In its place HP is preparing a push into the distribution arena.

“We’ve done some further analysis of other verticals, and we’ll probably be adding distribution as a focused vertical for next year,” he said. “We have some strong solutions in the distribution market, and it’s one that makes sense for us.”

Sterling also presented a list of other vertical markets where CSY plans to focus its 3000 efforts. Insurance, banking, utilities, hospitality, real estate, travel, education and government appeared on the list. The general manager said CSY will continue to support other business segments.

“Just because your particular industry doesn’t happen to be on the list doesn’t mean we don’t have a lot of strong solutions in those vertical markets,” he said. “These are the ones where we have the most vertical growth and the most new customers, where we’re focusing our marketing dollars.”