Hewlett-Packard announced March 31 that it will acquire privately held enterprise content management software maker Tower Software in a cash transaction.

The deal will give HP all the outstanding shares of the company in exchange for $3.39 (Aus.) per share. No other financial details were made available.

Tower, based in Canberra, Australia, but fielding about 240 employees around the world, was established in 1985 as a records management company dealing mostly with government offices and agencies, CEO Martin Harwood told eWEEK.

The company's signature Tower Trim Context software has become a widely used electronic discovery and compliance suite, and it already is integrated with HP's archiving hardware and software.

Electronic records management software has become a strategic tool for organizations due to increasing national and regional rules and regulations, such as the Federal Rules of Civil Procedure, the Sarbanes-Oxley Act, and the Data Protection and Freedom of Information Acts.

A major advantage of Trim Context for HP is that it works seamlessly with Microsoft's SharePoint collaboration software.

"With this acquisition, we feel very well-positioned to address the emerging e-discovery software market," Robin Purohit, vice president and general manager of Information Management for Software at HP, told a conference call of reporters and analysts.

IDC estimates the e-discovery or litigation software market as being about $3.36 billion in 2008, growing at about 23 percent per year, while Forrester estimates the market to be over $5 billion and also growing at more than 20 percent, Purohit said.

HP is also seeing "tremendous shakeup" in the traditional content management market, he said, as Microsoft's SharePoint is being used "more extensively within the enterprise" for document collaboration.

"While traditional e-discovery is focused on e-mail and messaging, we think that Microsoft SharePoint is the next big opportunity for e-discovery and compliance," Purohit said.

SharePoint, a relatively new Microsoft product, is gaining market share by leaps and bounds, according to Enterprise Strategy Group analyst Brian Babineau.

"It [SharePoint] is replacing general-purpose network drives as group or departmental repository ... no more 'Z' drives where no one can find anything," Babineau told eWEEK.

HP customers now will be able to buy Tower's Trim Context to manage records and store the Tower repository on HP's IAP (Integrated Archive Platform), Babineau said.

"This is a very smart move [for HP]," Babineau said. "The Tower software provides structure to unstructured data, and it's organized, Web-enabled and searchable."

When the deal is complete later in 2008—most likely before July—HP and Tower will compete directly against Iron Mountain, CA (with its MDY product), and EMC (with Documentum) in this sector, Babineau said.