HP charts enterprise course

Hewlett-Packard’s acquisition of Compaq one year ago catapulted HP into the big league. HP Executive Vice President and Chief Strategy and Technology Officer Shane Robison talked with InfoWorld Executive News Editor Mark Jones and Editor at Large Ed Scannell about extending the reach of HP’s enterprise business.

How did the merger evolve, from your perspective?

I was one of the four people that architected the merger, and there are some important things that people need to remember if they think about where we are today. This has really been a three-year process. The first year was architecting the merger and getting it going through the approval process. The second year was about [gaining approval for] the merger and about integration of two companies, the largest merger in high-tech history. And we did that in one year, which was faster than we thought. We’re probably at least six months ahead of any reasonable schedule, so the execution has gone extremely well. The third year is about leveraging the results of the merger.

Critics charge that HP and Compaq’s combined value proposition is less than the sum of the two companies. What’s the reality?

A year ago, both Compaq and HP would have been ecstatic to get a $100 million services deal. We just announced a $3 billion services deal [with Procter & Gamble]. So the size and scope of the business engagements that we can have in the marketplace has dramatically changed. It’s a combination of the strength of our balance sheet, the comprehensive nature of our offerings.

So consulting, services, and outsourcing are the company’s long-term focus?

For the [enterprise] part of the business, that’s correct. What I think you’re seeing in our services business is an increase in the outsourcing types of engagements, both in terms of the number and in terms of the size, and that’s the important part to look at. What we needed to do is get the other parts of the business executing equally well.

How has the merger affected your hardware business?

Since the merger, we have become No. 1 in storage, No. 1 in industry standard servers, No. 1 in Unix, [and] No. 1 in Linux. We also regained No. 1 position in PCs. [The PC market] is a tight race. That one will bounce back and forth probably.

When you think about HP as a technology company, the trouble is nothing stands out beyond consumer technologies. Where does that leave the enterprise business?

I think we’ve got to continue to build momentum. I would assume you’d consider Procter & Gamble a Global 100 type company, and we just did a pretty big deal with them. Our value proposition is delivering high-technology solutions, which is a combination of services, software, and hardware at a best-in-class price, with high customer satisfaction.

There is a perception out there that HP really hasn’t weeded out enough overlapping products. For example, there are too many blade servers.

We need to set the record straight on that, because that happens to be one of the things that I was personally involved with. The blade server example is one where it’s just fundamentally not true. We made a decision about which blade product we were going to go with, and we announced the end-of-life process for the other blade products. We have an aggressive migration program to make sure that [customers are] migrated to the product lines that we’ve chosen for going forward. At the top end, [with our] NonStop platform, we’re going with NSK [NonStop Kernel]. With Unix, we’re going with HP-UX and we’ve end-of-life’d the 364 technology. With industry standard servers, we’re going with the ProLiant line, including blades.

What were some of the most strategically significant technology decisions HP made under its adopt-and-go philosophy?

At the microprocessor level, it’s all about Itanium. We have a very good, three-operating-systems strategy, with NT, Linux, and HP-UX. In the middleware space, we’re partnering with BEA, Microsoft, and Oracle. Linux comes in everywhere. We’re fully capable and deployed in terms of services support for both .NET and J2EE in terms of delivering Web-services-type infrastructure. And then we’ve doubled down on our management software bet. We’re investing heavily in the future of OpenView and Utility Data Center and all the concepts around that adaptive enterprise comprehensive solution.

Are there any technology decisions you would like change?

I can’t think of an instance where if we could start over again, we would do it differently.

Itanium 2 is a huge bet for HP. Why are you convinced this was the best decision?

Everybody’s locked into this not-backwards-compatible-with-existing-application-stacks-out-there [argument]. One of the things that customers want is better return on their IT investment. In the enterprise space the applications had to be ported to Alpha, PA/RISC [Precision Architecture/Reduced Instruction Set Computing], MIPS, SPARC, Power 4. And [they had to be] completely supported on all of those platforms. Plus there’s probably a few others that I forgot to mention. Talk to me about backwards compatibility. The problem is everybody thinks that all you have to worry about is Windows and desktop applications, and that’s not the case. What we’re seeing is a major consolidation that’s required by the fundamental economics in the enterprise space around the microprocessor and the ecosystem that’s required to use it in enterprise applications. So the decision that we make to consolidate three major microprocessor platform ecosystems to one is obviously a cost benefit to us which passes through to the customer. And it saves the entire ISV community a huge investment, because now they only have to target one platform. They don’t have to target three.

What’s ahead for HP on the Itanium road map?

This year, we’re releasing a full set of platforms on the Madison chip, and the goal there is to extend Itanium across the entire IT datacenter — from the Web tier through the application tier to the database tier — running ERP. Madison will launch in the middle of June, and our products will start coming out monthly until September or October.

How is HP working to foster innovation in other areas?

There’s a whole bunch of things that we’re doing out of my office. One of the things we’ve done is going to happen [the week of May 1]. We’re holding a major internal technology conference intended to be a celebration and recognition of the best deep technical work done throughout the company. In order to attend the conference, you have to write a paper. The papers will be reviewed — just like they are in the very best technical conferences — by a senior committee from across the business groups and the labs. We had more than 1,500 papers submitted. We were only going to be able to accept 500 people to the conference, and we’re only going to be able to actually present 50 of the papers. The work was absolutely stunning in terms of the quality and the depth and the innovative thinking that’s going on throughout the company. There’ll be three days [for] three tracks of the very best of the best presenting their technical work to each other. It has all kinds of benefits, including the ability to leverage things going on throughout the company in whatever you’re engaged in.

HP’smessage has been confusing where this notion of invention is concerned. How can HP clearly present itself as an inventor when you are busy building a services and outsourcing business?

You have to look at all pieces of our business. The enterprise part of the business is focused on delivering competitive, world-class platforms. And the HP-UX guys are focused competitors for Sun and AIX [Advanced Interactive eXecutive] and the other Unix players. Your criticism in terms of where we may not be getting the message out, now I’ll take that. But in terms of the actual facts, what’s happening is those guys have been innovating like crazy and getting a lot of work done.

HP needs to establish a meaningful identity as a software company. But we get the feeling you don’t really want to do that.

Well, we do. The three parts of our enterprise strategy are services, software, and then the infrastructure. And it’s very important for our software business, as we have defined it, to be a strong, stand-alone business. But that’s all about manageability and the extensions in the evolution of the strength we have in OpenView and Utility Data Center.

HP is comfortable talking about IBM, but how clearly has HP differentiated itself against Dell?

Dell has set the bar, and don’t get me wrong, IBM and Dell are both formidable competitors. If you look at our performance in the PC business, [we] broke even last quarter, which was a huge improvement over the last several quarters. In the third quarter, that business was losing $250 million. So we have fine-tuned the machine between our operations side, executing our ability to deliver direct, optimizing our channel partnerships. And one of the things you’re seeing today is Dell recognizing that we are priced right on top of them. And [HP has] a broader reach because not only do we have direct capabilities, we still have our channel capabilities. And it’s a balancing act to make sure that you get the broadest market possible.

So you think that you can actually run a supply chain more efficiently than Dell?

I did not say that. We will be competitive with Dell. We have made dramatic improvements in our supply chain. And that’s reflected in our ability to price right on top of Dell.

How are you handling the balancing act of partnering with Microsoft and building out a Linux business?

We are dedicated to the Microsoft partnership. We work hard with them in optimizing the performance of their software on our platforms. But we are also dedicated to the Linux community, and there’s a large set of our customers who want that operating system as part of their solution stack. We have a partnership with Red Hat and United Linux, and we go to market with them, just like we go to market with Microsoft. The Microsoft issues don’t tend to spill over into our decision-making process.

Looking ahead, HP is focused on building out theUtility Data Center. When will this become a must-have for enterprises?

Well you can see parts of it, the standard offerings, this coming year. To realize the full vision of Utility Data Center is going to evolve over the next two or three years. But today, we’re deploying a lot of the fundamental capabilities, and people are looking for them. People are looking for storage virtualization. They’re looking for virtualization in their rack-mounted servers. And now, the next step is to tie that all together in the higher-level virtualization capabilities. What people don’t realize is we’re delivering the fundamental stuff today.