Cloud // Software as a Service
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10/4/2010
08:58 AM
Doug Henschen
Doug Henschen
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HP's Path Forward Under Apotheker

Deeper partnerships for the short term, plus visionary investment for a changing world of IT.

Set a Course for Innovation

On the topic of innovation, HP can't count on much of any until it unwinds the tight clamp Hurd put on R&D investment, cut from about 4.0% of net revenue when he joined the company down to about 2.5% in 2009 (by comparison, IBM reinvests about 6% of revenue in R&D).

HP knows this is a sore point. Thus, last week's press release on Apotheker's appointment made the prominent claim that he "transformed R&D and technology platforms" while at SAP.

By most accounts I've read, the engineers and technologists in Waldorf were only too happy to see Apotheker go. Jim Hagemann Snabe, SAP's new co-CEO, is one of their own. And soon after Apotheker was let go, SAP elevated technology chief Vishal Sikka to the board, sending yet another message to customers and employees that technology -- not sales -- would once again drive the company.

Apotheker is not a technologist, let alone a Steve Jobs type. But let's give him the benefit of the doubt for now. By delegating to the right people and reversing HP's R&D budget cuts, he could set a new direction favoring innovation. And those innovations could (eventually) be applied in both the consumer and enterprise markets.

Get Into the Enterprise

So how should HP go about diving more deeply into the enterprise software market? The quick, costly and foolish way would be to buy into the enterprise applications market that Apotheker helped create. Yes, HP could quickly gain big enterprise market share by acquiring SAP, but that would not be the smart long-term move.

"Even IBM has looked at potentially buying SAP… but that's really buying into the past," says Ray Wang of Altimeter Group. "

Much as Apotheker might like the sweet revenge of acquiring and once again leading SAP, HP could get much more bang, buzz and long-term growth for the buck by buying small, up-and-coming software-as-a-service vendors. Salesforce.com is pricey at the moment, with a valuation estimated at about 95 times earnings, but you could put together a balanced portfolio drawing from the likes of SuccessFactors, RightNow, NetSuite, Workday, Adaptive Planning, Host Analytics, PivotLink and others.

HP could also buy infrastructure vendors with an eye toward the cloud computing platforms of the future. With this in mind, Wang suggests integration and storage vendors as well as direct cloud computing service providers such as Rackspace.

Join the Stack Game

Despite all the hype about integrated and optimized stacks, I'm not convinced that the latest generation (borrowing from IBM's mainframe and AS/400 varieties) has gone much beyond the concept phase. From what I've seen, the term "integrated stack" has been greatly confused and conflated with the term "appliance."

Appliances are generally very targeted offerings aimed primarily at data warehousing. They are comparatively simple combinations of database, operating system, network connectivity and some level of analytic software.

IBM's Smart Analytic System is a bit broader, but as the name suggests, it's still confined to analytics, adding options for data-integration and BI software as well as a few analytic applications. Oracle Exadata is broader still, providing a starting point for data warehousing or transaction processing. But it's just a starting point. It's not like the middleware and applications are shipped in the same box, preconfigured, optimized and ready to go. Even Exalogic, the very latest from Oracle, does not include Fusion middleware, let alone applications.

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