Five Highlights From HP’s Analyst Briefing This Week

By Peter O'Neill

I spent a couple of days with HP executives this week here in Boston. As I worked there myself for 20 years (up to 2001, so I have distance as well), I’d like to comment about how their enterprise business strategy now looks. Of course, I wasn’t alone there; there were 250 of us. Those who follow my peers in Twitter may already be overloaded with multiple 140-character cuts: my impression is that the tool tends to makes them behave more like adolescent journalists than analysts. Often, they were broadcasting tweets before even noticing that a particular statement was “under NDA”. Vendors will learn to be more cautious in the future; which is not good for us analysts. Anyway, here are my highlights of the HP briefings.

HP’s Converged Infrastructure story includes the pending acquisition of 3COM

Nice to see that HP now has (servers + storage + networking) PLUS power & cooling! Now, HP has Cisco squarely within their sights with this one, dropping statements like “they’re just a $30B vendor while we spend over $50B in our supply chain”; “as soon as we can, we will replace ALL our Cisco gear with 3COM and realize 45% savings”; and “of course, all 3COM products use the same operating environment, unlike them”. 

My Take: Well, Cisco started this. They are, indeed, seriously threatened. If HP apply their financial muscle and play the pricing game, Cisco’s business and margins may well suffer. Remember, networking is the highest margin area in IT infrastructure: HP is adding it, Cisco is diluting it. But, I also think that Cisco will make other game changing moves in the next months. HP strategists should not be resting on their laurels, they should be doing scenario planning - and thinking way outside the IT infrastructure box.

HP’s new Application Transformation campaign has great potential

HP software has been working for a while now on positioning its extensive software portfolio to specifically address the issue of planning and executing an enterprise-wide applications portfolio transformation. Now they’ve gone a step further and combined with their colleagues from enterprise services (ex EDS) and can now offer 30,000 consultants who help enterprises to address this challenge.

My Take: This could be massive. It can put HP into the CIO’s office while others leave or stay out (IBM is saving the planet, Oracle and SAP are on maintenance revenues). In fact, if HP went one step even further from the technology itself (never easy for them) and created an ecosystem of motivated consulting partners like Accenture, PWC etc. they could well kick off an “IT re-engineering” go- to-market wave similar to SAP’s ecosystem momentum in the 80s and 90s. 

HP’s has a (sort of) stance on cloud computing

During a break, I chatted with the HP Enterprise Business GM, Ann Livermore, and reminded her of our meeting at Yahoo in 1999 to discuss their buying HP servers. She chuckled as she remembered how Jerry Yang threw us out after an hour, saying “we don’t buy servers, we make them ourselves”. She commented that, now, they are as good as wall-to-wall with HP kit, as is Amazon.  HP sees its major cloud opportunity as being the arms supplier and even a “service provider to service providers”.

My Take: HP’s story on cloud is ingeniously vague. They agree that nobody really knows where this is going but enterprises need assistance in understand the developments. And, whoever, or whatever, wins in cloud will more than likely be powered by HP. I think this is exactly the right tone to take. Let somebody else do the hyping and confusing.

HP’s industry marketing just got real

The traditional view of industry-focus at HP was to form a sales district or two; train the sales reps on current needs in that industry (though they still sold technology); port a few industry specific ISVs onto HP and make some collateral pieces. The opportunity after the EDS integration is that HP has subsumed new intellectual property, industry-specific code and services now written by and operated by HP in industries such as financial services, transportation, health care and public sector.

My Take: HP can build on this an strengthen their industry solutions approach. Under non-disclosure, HP shared some of their future products and services plans for specific industries. They are impressive and will have high impact.

Anything for HP to worry about?

My Take.  Well, the strategy still needs to be executed. But another issue I observe is that the continuing and relentless pressure within the corporation to cut costs and re-organize is having an increasing impact on employee morale. As with any company, the most valuable assets are the employees and HP’s success in past decades was very linked to the oft-documented “HP Way”: respect for each individual; support for individual contributors; and freedom to innovate processes. My impression from talking to many current employees is counter to this history. So, I hope that sufficient attention is being paid to a more constructive human resources policy or HP could find they are losing their best people once the economy and our industry does pick up again.  

Anyway, I’m enjoying our conversations, so keep your comments and emails coming.   

Always keeping you informed!

Peter

Comments

HP Transformation

While HP is trying to find a a new success mantra in the convergence story it will be very important for them to find synergies between their acquired businesses. I am yet to see truly integrated story coming from the HP which is based on collaboration among their acquired businesses.

The battle of application vendors vs. infrastructure players can only be won if they are able to channelize their energies to come up with new products / services by leveraging the new acquired capabilities

Synergies are not easy to achieve at HP

Kumar,
You are right but the HP people are already extermely pleased when they can coordinate between disparate businesses within the Enterprise Business "group". To then combine with the other business groups at HP is beyond most product managers or business development staff. The synegry happens, if at all, in the field in front of the customer.
Peter