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10/25/2009
08:38 PM
Bob Evans
Bob Evans
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Global CIO: Hewlett-Packard CEO Hurd's Strategy: The Infrastructure Company

Promising that HP can combine massive scale and innovation, CEO Hurd says it will separate itself from IBM and others by having a complete end-to-end line of hardware, software, and services.

1) IBM Hurd interrupted the question mentioned in the preceding paragraph by saying, "I don't follow them that closely (audience laughs) so I don't know what they're working on so maybe you can tell me. Sounds like they're trying to chase us (more audience laughter). I think that the companies are very different—so I think in the end, yes, there are some services competition between us and a couple of people, but if you try to overlay market positions in the infrastructure business—and I'm a big believer that when you look at these infrastructure segments [PCs, servers, storage, networking, software, services, etc.], you can't be in any one of them as a hobby—you will not compete in these segments of the market as a point-product player over the long run.

"Because compared to any competitor out there, you have to bring a combination of low cost and total cost of ownership supported by innovation. So when you look at HP, I think HP says, 'We plan to compete and lead in each segment of that [infrastructure] stack, and I don't think you can insert the company you mentioned or any company for that matter against that map."

And later, this in the context of IT-vendor consolidations: "So when you talk about the infrastructure market, you can't be in as a hobby. And I'm not trying to pick on any company to say—if you'r egonna go in, you gotta go all the way in, 'cause there's no—I'll give you an example. When a company would sell off its PC business, for example (audience laughter)—I'm saying if they would—I'm not sure who would, but if they did—you would have a problem because you would no longer be as big a customer to all those people that supply all those products as part of that supply chain. So this as I talked about before is a big issue about cost and innovation meeting to form a great solution and a great product."

My comment on that: When Sam Palmisano made the decision for IBM to get out of the PC business, I'm sure he and his team evaluated every repercussion, including resultant impact on supply-chain pricing and priorities. And I'll bet that specific consideration ranked about 27th on the top 10 list of questions Palmisano thought about before making his final decision. And this outlook from Hurd, and my guess—it's an educated guess, but still a guess—about what Palmisano's outlook might have been, reveal strongly that HP and IBM are very different companies run by very different leaders.

2) HP's Transformation, including IT Hurd emphasized that the 82/18 flip at HP was a companywide effort that certainly included IT but also included all of the company's business processes.

"I wanna be clear: this was HP's transformation, not IT's. And I give a ton of credit to our IT organization—a ton—they did a great job for HP—but if you don't have our business leaders lining up behind this, it doesn't happen. It doesn't happen."

In 2004, Hurd said, HP had revenue of $79 billion and spent about 6% of that revenue on IT, or about $4.2 billion. And of that $4.2 billion, 82% was spent to keep the lights on. "Today, we've flipped the model—our spend is down 40% overall and our innovation is up 2X in dollars. So we spend about—with 18% out of $4.2 billion it's in the ballpark of about $700 million—we spend about double that today [on innovation]." But the big idea, he said, wasn't just an accounting change.

"We literally had to go at this from a process perspective: process by process by process and meet the apps in the middle, with all the IT infrastructure below. This was all given to one person, so Randy Mott, our CIO, owned all the IT infrastructure in this company—no questions asked, one set of governance. The businesses own the processes and they meet in the middle at the applications. So they have to have a definition of what requirements do I need to have to run the business, and applications do I need to have to leverage the infrastructure."

As for cloud computing, boy oh boyzee does Hurd dislike that term:

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