Hewlett-Packard's choice of Leo Apotheker as the company's next CEO surprised many, but there are no surprises in the challenges that await him as leader of the world's largest technology company.
HP must deepen its presence in software and services or it will face low profits, low growth and a marginalized position in the IT industry.
It's unanimous that the selection of Apotheker, ex-chief and 20-year veteran of SAP, is a confirmation of the importance of enterprise software to HP's future. That point was also underscored by the appointment of Ray Lane, former Oracle president and COO and now a venture capitalist, as nonexecutive chairman of HP's board.
But what's the best path forward in a market in which rivals like Oracle and IBM and hard-to-acquire partners like SAP and Microsoft have many of the biggest and best names in software sewn up? As I've commented previously, just going out and buying software companies, willy nilly, is not the answer.
HP's best hope lies in a two-pronged strategy. In the short term, there's no choice but to forge deeper partnerships with the likes of SAP and Microsoft. Creative product and service packages could blunt whatever momentum the so-called "integrated stack" players have managed to generate. For the long term, HP must make strategic investments in growth areas such as cloud computing infrastructure, platforms, applications and related services.
Despite initial surprise at the selection of Apotheker, some note that there just aren't that many global CEO types out there with tech industry experience, and even fewer with software industry experience. (An HP board spokesperson said the company had a short list of six candidates, but that Apotheker was the only one offered the job.)
Compared to the CEO choice HP made nearly five and a half years ago, when it plucked Mark Hurd out of the relative obscurity of NCR (a kiosk and point-of-sale-system vendor), Apotheker is a celebrity.
What Hurd lacked in big-name recognition (at the time) he made up for in relevant experience, having spent 25 years with a computer hardware manufacturer. Apotheker, in contrast, is all about what HP lacks, not what it is today. The ambition is clearly to become a bigger player in enterprise software, but some question whether Apotheker's experience is what HP really needs to get what it's after.
"Consumer innovation is really what's stimulating offerings for the enterprise these days," observes analyst Frank Gillett of Forrester Research. "It's not that enterprise experience isn't relevant, but you need somebody who can blend the two worlds."
Honestly, though, there are even fewer CEO candidates who have straddled the consumer and enterprise technology arenas. And even if HP found one, where could such a wiz apply consumer-Web innovations within HP? By some estimates, software currently accounts for less than 5% of HP's sales, and most of the software the company does have is aimed at IT types who don't demand slick, user-friendly interfaces.
Consumer-savvy innovation is obviously important to HPs PC, printer, and fledgling smart phone businesses. But the company has to really get into the enterprise software game before it can bring Web 2.0 innovation to that market.
