Microsoft (MSFT 0.59%) is making inroads in a key market, and at the rate its going, longtime stalwarts including Hewlett-Packard (HPQ 0.65%) and IBM (IBM 2.71%) better stand up and take notice.
IT operations management: What is it?
Computer Weekly Developer Network describes IT operations management, or ITOM, as, "the day-to-day tasks related to the management of technology infrastructure components," and the "individual applications, services, storage, networking and connectivity elements of a total IT stack." And the ITOM market is big, in both the cloud and traditional IT environments, and getting bigger. According to research from Gartner, the ITOM software market generated $18 billion last year, up 4.8% from 2011.
Though Microsoft ranks fourth in the ITOM marketplace, things start to get interesting for investors when we analyze the last couple of years. The top five ITOM vendors account for 55% of the entire market, and of those, Microsoft has easily outgrown the others on a percentage basis: Jumping 11.2% in annual revenue from 2010 to 2011, and up 16.1% from 2011 to 2012.
The next best growth by any of the top five ITOM vendors last year? BMC Software (BMC +0.00%) was up a paltry 0 .9% year over year. Even IBM, the undisputed king of ITOM, grew a mere 0.8% in 2012. Granted, IBM's $3.28 billion in ITOM revenue in 2012 handily beats Microsoft's $1.48 billion, as does BMC's $1.92 billion, but the trend is clear: Microsoft is leveraging its enterprise and cloud computing customers better than its ITOM competitors.
Of the top five, only Hewlett-Packard and CA Technologies (CA +0.00%) -- a $12.35 billion market cap ITOM solutions provider -- experienced a decrease in revenue compared to 2011. HP experienced the largest decline of the big boys, falling 4.3% year over year. CA was essentially flat, dropping 0.6% to $2.21 billion in revenue compared to $2.26 billion in 2011.
The big picture
Investors aren't discounting the strides Microsoft is making in mobile computing and cloud-related products, including Office 365, as evidenced by its share price pop of over 27% so far this year. IDC's recent data showing Windows Phone taking over the No. 3 smartphone OS spot in Q1 of this year is also a great topic around the proverbial water cooler.
Now toss in the success Microsoft is enjoying in ancillary businesses like ITOM, particularly compared with competitors like HP and CA, and the mid- to long-term growth prospects really get interesting.
IBM is cheaper than Microsoft on a trailing P/E basis, largely due its stock price decline after missing analyst estimates in the recently announced Q1, combined with Microsoft's stellar run since its own earnings release on April 18. But what separates Microsoft from IBM and others, is its success in growing multiple business lines simultaneously, including ITOM revenue, even as its competitors remain stagnant or decline. The market loves talking about Windows 8 and mobile computing, and that's fine, but Microsoft is proving it has a lot more to offer investors.
