I have written previously about HP’s $6 billion write-down of its $14 billion acquisition of EDS. My argument was the need for business focus on commoditised infrastructual services in the cloud, in a competitive landscape thus defined by the Amazon Elastic Cloud.
I have now had the privilege of meeting HP’s executive vice president of technology and operations John Hinshaw and to debate this conclusion in the context of CEO Meg Whitman’s five-year masterplan for the company.
Hinshaw is 16 months into his HP role, and is responsible for all of HP’s underlying global infrastructural, back office and front-line support services.
An earlier consolidation reshaped 85 HP data centres into three matched pairs, which Hinshaw describes as having been subsequently virtualised into a genuine ‘Private HP Cloud’: HP’s shared services on steroids. Where HP capabilities do not exist, it sources from the cloud: Salesforce for CRM, Workday for HR and DocuSign for secure document management.
In delivering the Whitman masterplan, this makes great sense. The shared dimension cuts opex and capex, liberating much needed cash; the services dimension supports vital business responsiveness and agility; the willingness to externally source where relevant talks of a practical realism. HP’s businesses can face their markets, confident in their operational underpinnings.
Those four businesses reflect Whitman’s description of HP is “the world’s largest provider of IT infrastructure, software, services and solutions to individuals and organisations of all sizes”. No issue with focus then...
The four are: the merged Printing and Personal Computing ventures, now HP Personal Systems Group (worth ~$62 billion); HP Enterprise Group (infrastructural hardware and related operational software)(~$32 billion); HP Software(~$4 billion); and HP Enterprise Services (~$25 billion).
HP Enterprise Services is the ‘being reworked’ EDS. This is a cloud services business. My challenge to Hinshaw was that HP has been built with a deeply rooted hardware and software culture, as has EDS. Creating a powerfully competitive services culture on such foundations is a major challenge.
Hinshaw’s response was to point at the quality and experience of the new leadership now in place – and to the demand from established clients for HP to offer a full range of the capabilities in the journey to New Style IT. But, at the end of the day, these ‘enterprise services’ are quite unlike anything that have hithertofore been nurtured in HP or EDS: highly standardised and commoditised converged compute and network services, sourced on demand and on price in highly competitive markets. The ability to assure security is key, and HP has a strong hand, but the Amazon Cloud is as secure on all measures.
Then there is Project Moonshot from the HP Labs. These new hyperscale servers promise to consume up to 89% less energy, 94% less space at costs 63% down on the competition. An impressive technological step change – but is it a sustainable ‘edge’, especially as the competition can source and exploit the servers?
This services challenge will be my first acid test of the new Meg Whitman HP.
The second key issue is the wisdom of creating the new HP around four very different businesses: even the two that are software and hardware to the core (Personal Systems and Enterprise) play to very different markets. Constraining the four within a single business framework has to be open to investor challenge.
Both Hinshaw and Whitman argue that HP has over 1000 established client relationships with major companies who, in making the transformational journey to New Style IT, value HP’s ability to bring all dimensions of the complex changes into play: from the fixed desktop into the mobile world, from data centre into the cloud, from locked-down legacy code into loosely-coupled web apps, to which add Big Data and analytics expertise, and security. There is a certain logic here.
But my challenge to Hinshaw was that this risks being a CIO-centric view, and in the New Style IT (with the competitive, flexible sourcing of services at its heart) change is often driven from elsewhere in the enterprise. It was marketing and sales who lapped up Salesforce.com, not IT.
Thus my second acid test for the new Meg Whitman HP. In the (new) beginning Meg created a four-horse chariot – four high-tension thoroughbreds of very different breeds...