HP Shoots for the Clouds

Posted on March 15th, by thinkstrategies in Uncategorized. Comments Off on HP Shoots for the Clouds

HP’s new CEO, Leo Apotheker unveiled the company’s latest corporate strategy yesterday with plenty of fanfare, but little flourish.

The theme of his talk and HP’s new mantra is providing “connectivity” to the Cloud to move “Everyone On”.

While the picture he painted of this new world order and HP’s strategic response covered all the bases, there are still plenty of pieces which must come together in order to make it a reality.

Apotheker’s ‘vision’ was certainly well-conceived and his presentation was well-scripted. No one can argue with his view that,

“We see clearly a world in which the impact of cloud and connectivity is changing not only the user experience, but how individuals, small businesses and enterprises will consume, deploy and leverage information technology.”

I would also agree that “HP is well positioned to be the trusted leader in addressing this opportunity.”  But, it faces plenty of problems capitalizing on this opportunity.

Apotheker’s four-point strategy to capture this opportunity includes:

  1. “Extending its leadership in managing and optimizing today’s traditional environments;”
  2. “Leveraging HP’s core strength in cloud to build and manage next-generation cloud-based architectures;”
  3. “Being the trusted partner to customers by enabling the seamless transition to hybrid computing models; and”
  4. “Defining and delivering the connected world from the consumer to the enterprise.”

That just about covers every angle of today’s rapidly evolving marketplace. And, HP has been inching in this direction for a while. It is not only the largest IT vendor, but also boasts a very loyal consumer, SMB, enterprise and channel following.

But, HP is also burdened with legacy products, both hardware and software, as well as cumbersome business processes. Many of its systems are too expensive. Nearly all of its software is too complex. And, too many of its business processes are too disjointed. So, attacking all of these market opportunities simultaneously in an cost-effective and profitable fashion isn’t going to be easy.

The good news is that Apotheker and HP recognize these issues and are promising to address them. Even more promising is Apotheker’s statement that they are not going to acquire more legacy systems and software to solve their problems. This will hopefully put to rest the persistent rumors that HP will acquire SAP.

Instead, HP needs to build and acquire new functional capabilities which will quickly automate its systems and SaaSify its software and services.

HP must carefully traverse the three segments of the Cloud Computing world — Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS).

While Apotheker suggested that HP must play in all three areas, I would suggest that it concentrate on SaaS and IaaS, and limit its PaaS efforts to inviting third-party developers to add onto its OpenView IT management suite via application program interfaces (APIs) which can enhance and accelerate the evolution of OpenView. I call this the “tugboat” strategy.

In order for HP to outduel IBM, I believe it must capitalize on its consumer market presence; focus on its IT management capabilities, and keep its corporate infighting to a minimum.

IBM gave away its PC business and has no handheld device or consumer market presence. It has put its software emphasis on cloud enablement rather than cloud management. Middleware is important, but so is controlling the chaos created by the Cloud. And, IBM continues to contend with political battles between its hardware, software and services divisions which not only retard its responsiveness to rapid market changes, but also compounds its costs as each group seeks to maximize its revenue streams.

HP is certainly suscepitable to the same organizational issues, but can counteract them by exploiting its channel relationships and consumer orientation.

While Dell can match HP on the consumer front, it is still playing catch-up at the enterprise level with its Perot Systems services and automated systems. And, it hasn’t been able to overcome its historic channel issues.

When Lou Gerstner took over IBM as it was coming apart at the seams and many called for its divestiture, he proclaimed that the company’s competitive advantage was its broadbased portfolio of hardware, software and services, and asserted it didn’t need a vision it needed to execute.

Apotheker also sees the benefit of a multidisciplinary corporate portfolio, but believes that it needs to be guided by a new vision to fuel its continued growth.

Converting a vision into execution doesn’t happen overnight. In fact, it will probably never be entirely fulfilled. Instead, HP will be measured by how quickly it can demonstrate it is making tangible progress in its efforts.

[Disclosure:HP, IBM, and Dell have all been THINKstrategies clients.}

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