InformationWeek
Defining The Business Value Of Technology
December 22, 1997
HP Gets Aggressive
HP is banking on Intel's 64-bit architecture to help it regain its edge in enterprise computingDiscuss HP's Market Plans in InformationWeek Online Shop Talk
By Mary Hayes
This week, HP will detail a series of efforts designed to ease the migration from its proprietary PA-RISC processors to Intel's IA-64 architecture. Software vendors such as Oracle and Baan will pledge support for the forthcoming architecture, and HP will unveil migration tools and services to help users of its Unix servers plan the move. IA-64 isn't due u
ntil 1999, but that's not stopping some intrepid corporate customers from making early plans-and HP from bragging that it has the early lead because of its co-development with Intel (see chart, p. 20).
Analysts and vendors say IA-64 will provide a single platform for everything from Windows NT workstations to data center systems, driving the price-performance benefits of Intel's mass-market model into high-end systems and even threatening the survival of competing processor architectures. As such, some customers say it's time to start planning the move now.
"We have to think quickly," says Guy Wood, managing director of IS at United Grain Growers in Winnipeg, Manitoba, which has 200 HP Unix servers. United Grain is one of the first to sign up for HP's IA-64 services and tools, which Wood hopes will ease the migration. "If we get it right, users will wonder what the fuss is about," he says.
If not, it has "the potential to be a disaster."
The IA-64 effort is only one sign of a bold new HP.
The company's Unix momentum faltered badly earlier this year when it started to push NT alongside Unix-and Sun Microsystems wasted no time exploiting HP's lack of high-end Unix systems. Now, HP has begun shipping high-end systems and says that its Unix-NT strategy has been vindicated as users deploy both operating systems.
Starting in 1998, HP promises to accelerate the rate at which it improves server performance to 100% a year, from about 50% now. HP also plans to deliver PA-RISC servers that can be upgraded to Merced with a board swap.
Meanwhile, HP has revitalized its PC business, focused its software strategy on fewer product lines, and pushed ahead in Internet-related areas such as electronic commerce, where it had appeared sluggish. "We have been through an incredible amount of change in the past year," says Rick Belluzzo, executive VP and general manager of HP's computer organization.
But there's no question about where HP feels it has the advantage. "IA-64 is not a question anymore," B
elluzzo says. "We got to the position early, and we built leadership around that technology."
Questions About IA-64
One key point, HP says, is that PA-RISC applications will run without compilation on Merced. Most users will want to recompile their applications to get performance benefits, but HP says it has another advantage: compilers that have already been honed for the new architecture.
But just how much of an advantage the chips will provide is u
nclear, because Intel refuses to disclose performance information and stresses that the processors will be sold equally to the industry at large. "HP is leading in the race at this point, but that does not indicate how well HP will finish two years down the road," says Jerry Sheridan, an analyst at Dataquest.
What's clearer is that other vendors are lining up behind Merced and IA-64. Microsoft thinks Merced will be a "key driver for furthering NT's acceptance into the most demanding enterprise environments," says Bill Shaughnessy, a Windows product manager at Microsoft.
Sun said last week it will partner with Intel on porting its Solaris operating system to Merced. While Sun says it has no plans itself to offer systems with Intel processors, it's been trying to get makers of Intel-based systems to adopt Solaris-and has had one taker so far, NCR Corp. Sun, in fact, maintains that its Merced strategy is better than HP's: It has no plans to phase out its own Sparc architecture, so Sun users won't be fo
rced to switch.
Out In Front
Other vendors say such support is key. "The success of Merced will depend largely on the efforts of application developers to take advantage of its 64-bit capabilities," says Shaughnessy at Microsoft, which is adding 64-bit addressing to NT 5.0.
HP will also unveil a series of tools and forums for developers called Designing The Future; Epic planning services are scheduled for four HP locations to help enterprise customers move to IA-64.
Meanwhile, HP is working on rectifying its earlier mistakes. The company lost ground in both the Unix workstation and server markets this year when its dual NT-Unix strategy came off as a slackening commitment to Unix. "It wasn't clear to me what HP's
strategy was," says Steve Randick, CIO of the Chicago Stock Exchange, which chose NetPower NT workstations over HP. By the third quarter of this year, HP's share of the Unix workstation market had fallen to 24.7%, from 28.1% last year, leaving Sun with nearly 40% of the market, according to Dataquest.
Damage was also done in servers. Sun introduced its Ultra Enterprise 10000 high-end system more than six months before HP replied with the V2200 server in November. As a result, analysts say, Sun may have pulled ahead of HP in 1997 Unix server shipments.
HP executives admit that its win rate in server bids against Sun was only 40% early this year. "We had lost considerable momentum," says Bill Russell, general manager of HP's enterprise server group.
Analysts say that halfway through 1997, executive VP Belluzzo and CEO Lew Platt realized they would be foolish to neglect Unix. "The bottom line is that Belluzzo and Platt had dropped the ball," says Andrew Allison, a consultant in Carmel, Calif. "The
y finally recognized that the Unix business represented a lot of revenue." Allison says healthy Unix server growth is being fueled by server consolidations, the Internet, and mainframe-to-Unix migrations. "Almost everybody's Unix server business is up, from 20% to more than 30%," he says.
Russell, a former HP salesman, was put in charge of "reenergizing" the Unix server business, as he puts it. HP says it has orders for more than 300 of its V-Class systems-each costing $350,000 or more. Russell says total server orders were up 25% in the second half of 1997 over the first. He also claims that the scales have tipped in favor of HP in its bids against Sun's servers.
As more Unix users deploy NT, some say HP's dual strategy is an accurate reflection of their needs. "We wanted to move to a dual Unix and NT platform," says Rick Kish, CIO of HP user Barnes & Noble in New York. "HP's Unix systems are used for critical applications, such as payroll and merchandise, while the stores run on NT."
Mean
while HP's once-struggling PC business, which includes its NT servers, is now strong. HP has become the No. 4 PC supplier, with cost-cutting moves helping it compete. "We're much better in terms of price and distribution vs. Dell than we were a year ago," says Duane Zitzner, VP and general manager of HP's personal systems group.
HP will be quick off the mark with an eight-way NT server, which it expects to ship within weeks. It has turned around its notebook business and expects to add more models, including an ultra-lightweight machine designed with Mitsubishi, early next year. "We're seeing a lot of deals where the servers, desktops, and notebooks are being bid together. So we have to have a full line," says Zitzner. HP recently beat Dell to a two-year deal with Delta Air Lines for desktop PCs, notebooks, and PC servers.
HP also is addressing its Internet and software strategies. Key was its $1.18 billion acquisition in April of Verifone, a provider of payment systems based on emerging smart-card
technology. Citibank is rolling out the system for a New York pilot in which 700 merchants and more than 80,000 consumers are using smart cards for electronic-cash purchases. And analysts are enthusiastic about Changengine, an application framework for rapid business process change that's being used for E-commerce applications.
But HP's core hardware business clearly hinges on Intel's success with IA-64. If the architecture takes off as the companies hope, analysts agree that HP has a good chance of being best positioned to exploit it. "Intel wants to insist that the playing field is level," says Allison. "The fact of the matter is that it's a joint development, and HP knows more about Merced than any other vendor." Adds Dataquest analyst Peter ffoulkes, "If Sun and IBM want to manage a migration to Merced, it's going to be harder for them."
With additional reporting by
Bob Francis
,
Stuart J. Johnston
,
Marianne Kolbasuk McGee
,
Bruce Caldwell
, and
Tom Davey
ewlett-Packard's reputation as a passive giant never seemed to hurt its enterprise systems business-until last year, when a series of missteps left customers confused and HP open to challenge by competitors. Now HP is fighting back, using its close relationship with Intel in developing a new 64-bit computing architecture.
Actually, there are still many questions about IA-64, announced as a co-development by HP and Intel in 1994 but due to be manufactured solely by Intel. The high-end architecture will use a technique called Explicitly Parallel Instruction Computing (Epic) that's designed to improve performance by executing more instructions at the same time. HP says it's looking for double the power by moving from PA-RISC to Intel's first IA-64 chip, code-named Merced. HP also claims technical advantages because of its involvement in designing the chip.
But HP appears to have a head start. This week, the company will reveal that it's working with Baan, i2 Technologies, Oracle, and Manugistics to get their enterprise applications ported quickly to HP Merced systems. Baan has already been working with HP for 18 months.
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