Global CIO: Inside HP's Numbers: Mark Hurd's Top 10 Strategic Insights
As HP posts strong growth, CEO Hurd nears the end of his sweeping transformation of the world's biggest IT supplier.
Beyond the impressive financial results in Hewlett-Packard's latest quarter—including a 13% revenue increase strong earnings—CEO Mark Hurd's discussion of the results offered a range of deep insights into how his strategy for the world's largest IT company is coming together.
Through the end of last year, HP presented itself to the market as a series of big, capable, but somewhat disconnected pieces. Hurd himself packaged HP in October as "the infrastructure company" but in spite of his best efforts, that strategy at the time still seemed more aspirational than real. Here are some of the problems Hurd and HP were confronting 8 months ago:
The EDS services business was still in upheaval, the high-end server line and strategy were sketchy, the software business had yet to fully articulate its position in the cloud, the networking business was strong but narrow, and in the hugely important mobile field HP was glaringly conspicuous by its absence. (For more-extensive analysis on HP's challenges and advances over that time, be sure to check out our "Recommended Reading" list at the end of this column.) On top of all that, HP and the rest of the industry were still dealing with a frightening global recession that made the future more difficult to read.
But Hurd and his team have certainly been busy since then with operational refinements, product launches and repackaging, and two very strategic acquisitions—3Com and Palm—that have all combined to deliver a more robust and complete picture of HP's current position and future potential. In addition, the promotion of Tom Hogan to executive vice-president of sales, marketing, and strategy for Enterprise Business will drive a more-unified approach across HP's various LOBs and technologies.
As Hogan said in a recent interview, "And what we're doing now is a much better job of leveraging those assets in simple, cohesive package for our customers, and we're doing that by putting the focus on customer value instead of on point-by-point products."
So to offer further insights into how CIOs can expect to gain value from HP's products and services, here's my list of the top 10 strategic insights offered by Mark Hurd in this week's earnings call with financial analysts (with thanks to SeekingAlpha.com for its transcript of that call).
1) Global: Our Massively Mobile World. Noting that "global demographics are rapidly changing," Hurd said an emerging middle class will increase urban populations by 60 million people per year over the next two decades—and all those city dwellers will demand to be online: "This class of people will expect to be seamlessly and securely connected to the global community with mobile devices and the underlying infrastructure," Hurd said, adding that HP's ideally positioned to be the leading provider of that infrastructure.
2) Mobile: Beyond Palm. HP's planned acquisition of Palm "really has more to do with the intellectual property" than any specific products, Hurd said, because HP increasingly presents itself as offering a vast array of interconnected devices—not just smartphones or tablets. HP's "whole series of web-connected printers" need an operating system and HP would "prefer to have that OS in our case to be our IP where we can control the customer experience as we always have in the printing business, and that’s a big deal to us," according to the transcript on SeekingAlpha.com. Hurd emphasized that the Palm deal is much more than just a desire to offer a device in a hot field: it is "strategically broader" in that it allows HP to leverage its own IP across a wide range of interconnected HP devices.
3) 3Com: Data Center To Edge. Hurd stressed that HP's ProCurve business has performed very well but has "been on the edge of wireless," whereas 3Com extends HP's product reach from that edge into the heart of the data center—a scale that's essential if HP is to fulfill Hurd's vision of truly being the "infrastructure company." And the ultimate goal for HP is to integrate all of those pieces into its "converged infrastructure" portfolio: "Our networking strategy isn't a 3Com strategy. It's not a ProCurve strategy. It's not a virtual connect strategy. It’s an all of those capabilities brought together across the HP portfolio," Hurd said.
4) Services: Huge Upside. Asked by analysts about an apparent leveling off of growth from the services business formerly known as EDS, Hurd said that HP is seeing a "very strong improvement" in future orders and, just as important, has close to completing a fundamental restructuring of the operational side of the services business that should boost future margins as well as top-line growth. "We have spent a lot of time over the past year and a half really operationalizing the business, getting underneath issues in the business, opportunities in the business," Hurd said. "These are things like how we automate and drive forward on our data centers, how we align and drive our tools strategy going forward."
Next up are Software, Printing, PCs, the Microsoft relationship, high-end servers, and that feel-good feeling:
Join us for a roundup of the top stories on InformationWeek.com for the week of December 14, 2014. Be here for the show and for the incredible Friday Afternoon Conversation that runs beside the program.