What it means if HP dumps its PC business

Hewlett-Packard is looking to dump — er, spin out its PC business, and confirms that it has bought database and analytics vendor Autonomy for $10.3 billion. Plus, it is discontinuing its WebOS-based tablets and smartphones. Prepare for a major shift in the tech business and an acceleration of the “consumerized IT” trend in which business users increasingly drive technology adoption and usage — and traditional IT moves further and further into the back office.

On the face of it, such moves would mirror what IBM did in 2004 when it sold its PC business to Lenovo to concentrate on its software and services business. That shocked the industry, and IBM suffered a while as it made the transition to a vendor focused on the back end of business, not people’s desktops. But the strategy proved very effective, as PCs got more and more commoditized and letting go of them allowed IBM to venture where the profits were.

[ Exclusive interview: HP CEO Léo Apotheker and his plans for the cloud. ]

The Autonomy buy — if that happens — would signal not just more momentum for HP in the back office but for the kind forward-looking technology that is a key driver today: smart, contextual analytics. IBM, Oracle, and SAP bought traditional business intelligence vendors a few years back (Cognos, Hyperion, and Business Objects, respectively) to add old-school historic analysis and reporting tools to their ERP systems. But the strategic action today is in looking forward, not backward, so technologies such as Autonomy’s contextual search better fit that direction. Big data, semantic analysis, analysis of unstructured data, social sentiment analysis — all that is about growing the business, and Autonomy plays more in that contextual space than the competitors do.

Key implication: The post-PC era is truly upon us
Last week, one of IBM’s engineers behind the original PC said the PC platform has reached end of life, as the rise of tablets and cloud-basd services were reinventing what personal computing means. He’s right, and new HP CEO Léo Apotheker has been stressing since he came on the job that HP needed to move out of the commodity consumer business and into the higher-margin enterprise business.

Most of the time, you don’t need everything a PC brings to the table, and the complexity of dealing with malware, software licenses, patches, and more takes a real toll on both IT and individual users. Most of the time, for most people, an iPad, Chromebook, or Atrix Lapdock is all you need. Today, they can’t completely replace a PC, but in the next few years, I believe they will for most people; we’ll see homes with just one PC and several iPads or other new-generation devices, and businesses will start to treat PCs as special equipment for only those users who really need them.

Looking at the trend, it would make sense for HP to get out of the PC business while it’s riding relatively high and can get a decent price for it. (Dell, which has been neglecting its PC business in favor of moving more into small-business back-end technology business, won’t be so lucky.)

Of course, IBM long had a strong business selling to business — its PC business was never core — so it could more easily spin out the PC business than HP can. After all, if HP spins out the printer-and-ink business at the same time — that business logically pairs with the PC business — it loses its biggest chunk of income. (At one point, HP’s profits derived only from its ink sales.) That will constrain its ability to invest in new areas, at least during the transition period. But that’s par for the course for truly strategic change, and the real issue is not the effects on the quarterly profits but whether HP — a company that has been reeling from bad management under Carly Fiorina and Mark Hurd, and the resulting culture wars for years — can adjust internally.

Why might HP take this risk? Because coasting along as is would likely doom it to the same kind of irrelevancy that companies such as Nokia, Nortel, Novell, and Research in Motion found themselves in as they clung to the past and resisted the future. 

WebOS dies, ending HP’s universal-platform aspirations
One consequence already of HP’s post-PC rethink is the death of WebOS. HP’s vision for WebOS had been to make it the new platform for the whole gamut of devices, from smartphones to tablets to PCs. But its first WebOS tablet, the TouchPad, failed in delivering a compelling experience, so it’s not surprising that it ended up on the chopping block as an expensive attempt to hold onto PC relevance. HP also axed its WebOS-based Pre and Pixi smartphones, and left the future of WebOS itself uncertain.

Without the PC business, that vision made less sense — unless HP decided to keep its client business and purge just the PC part. It could have kept the smartphone, tablet, and perhaps printer businesses as the basis for its post-PC vision, as devices that are much more heavily integrated into the back end (cloud services, policy management, servers, and networking). In that non-PC post-PC future, WebOS could be HP’s hoped-for golden ticket. But HP decided otherwise, and instead retreated fully from its WebOS-fueled vision of having a universal client platform akin to what Apple has created with Mac OS X and the iOS mobile OS derived from it.

Jettison the life rafts to save the ship?
Spinning out the PC business and acquiring Autonomy would make HP into a mini IBM in terms of being about services and back-office tech. HP has been singing that song for a while, but shedding the PC business could be what the company needs to make its aspirations real.

CEO Apotheker is widely regarded as ruthless, even if his effectiveness first at SAP and now HP is questioned. Getting rid of the PC business would be a ruthless move to push HP in that back-office direction. By getting rid of the life raft that is the PC business, HP would have to truly make the transition or else fade away. There’d be no turning back.

That’s a big risk, but in the face of the post-PC evolution, it a sensible one. Whether HP makes this move — and whether it pulls it off successfully — it’s clear that we’re truly in the middle of a fundamental shift in technology that will affect not just vendors but users and IT, too.