Every year for the past 20 years I have attended HP’s annual analyst meeting. The first one I attended was quite small with a couple dozen analysts with all the focus on hardware. Having spent so much time with HP over these years I am in a unique position to give a point in time report card. I thought I was going to write up each day but I decided that one assessment would be best. It is not an easy task especially since HP has made 16 acquisitions (mostly in software and services) in the past three years. HP will not buy packaged software, it will however invest in providing vertical offerings for its most important customer segments including financial services, communications, media and entertainment, manufacturing, public sector, health and life sciences, energy, retail and consumer packaged goods.
I also heard that HP has begun to revitalize its lab organization and invest more in R&D. HP Labs has been a source of innovation for HP. It will be interesting to watch what new software and hardware technologies come out of the resource over the next couple of years. Mark Hurd, during his discussion with us mentioned that HP is spending $3.7 billion on R&D. This could result in some interesting opportunities for HP.
My take on HP is complicated — HP is a complicated company. I am struck by four key issues about this point in time of HP’s transition:
1. HP has finally begun to understand that the combination of hardware, software, and services are synergistic. HP was rather quiet about this change but it was clear that there is beginning to be orchestration both at the sales level and just as importantly at the software level. I am starting to see that HP is beginning to leverage software assets developed in its consulting organization and moving them into the software group. Likewise, software that had been captive in hardware is being decoupled and potentially given new life.
2. HP hardware organization is changing in interesting ways. There are four focuses for the hardware business: blades, power management, storage, and overall next generation data center (called Adaptive Infrastucture). This is the traditional business for HP which should remain a strong pillar of the strategy. HP has a strong client side hardware business unit that is separate from the enterprise server and storage organization. It will be interesting to watch how HP leverages its blade enclosures across its many hardware blades to create a powerful go to market strategy.
3. The software business. I get lots of questions about the viability of HP’s software business. I think that this has been complicated for HP. After all, HP has purchased so many software companies over so many years that it can be confusing. I am beginning to see some signs that a strategy is emerging here. While HP has some work to do to make all of this understandable and digestable. One good move was that HP has divided its software business into two units: Business Information Optimization, Business Technology Optimization (Enterprise Management and Automation), and First, HP has a very focused information management strategy with a focus on its NeoView data warehousing offering. The company is starting to win some important business — especially against Teradata. The other component of this business unit is based on records management. This includes integrated archiving and e-discovery (HP just bought Tower Software). In addition, there are some interesting new offerings in this area such as Exstream Software, a new acquisition that turns document data into electronic form so it can become information services. The company is focused on managing the content/document ecosystem. This should be a very interesting acquisition.
The Business Technology Optimization area is the most complex. It encompasses most of the enterprise infrastructure software and it the least well understood. For example, HP’s SOA strategy is within this space. The crown jewel for HP is the Systinet registry/repository for SOA governance. The product was picked up as part of the Mercury Interactive acquisition and has given HP a great starting point. The Mercury Interactive acquisition also provided HP with a strong position in software quality and testing. It is a sign of the change the new HP software that HP has been able to keep the value intact and use it as a foundational technology in many of its initiatives.
HP’s legacy software platform: OpenView is also part of Business Technology Optimization. The business continues to grow well and over time I think it will be a better understood strategic management asset. But I imagine that traditional OpenView customers are probably a bit confused. Long term the new organizational software structure will help HP sell at a higher level in the organization.
The most interesting transition for Business Technology Optimization is the addition of Opsware into the mix. OpsWare has a lot of very interesting IP in data center automation and in overall integration. I am still learning about all the buried value but the underlying data model and integration technologies make it an interesting set of services to fill out HP’s SOA strategy. OpsWare has been part of HP for only about six months but it is clear that this set of resources and people are having a big impact on the HP software strategy.
4. HP’s Services. HP’s services organization which has grown steadily. The biggest change that I am seeing is the adoption of a common framework. There is a lot more synergy between the services organization and the software group. Services now exchanges its software services into software. This is one of the strongest areas where HP can demonstrate its SOA strategy.
5. Virtualization. HP started to talk a little bit about the importance of virtualization as part of the future for HP across hardware, software, and services. There were a few interesting comments about cloud computing. But HP has a huge opportunity in virtualization that I think did not come through in the way I would have expected. I imagine that by next year the volume for this strategy will be a lot louder (at least I hope). I was encouraged by Mark Hurd’s comment, “Virtualziation creates interruption of the server market. The more of the market that virtualizes, the better for HP.”