Global CIO: In Praise of Mark Hurd's 9,000 Layoffs At Hewlett-Packard

1) 6,000 New Salespeople. In earnings calls with analysts and at his comments at HP's shareholder meeting earlier this year, Hurd has consistently said that a shortage of salespeople has stunted the company's revenue growth. Also, Hurd has made it a priority from the time he first took the job to focus more of HP's spending on customers and market opportunities rather than on employees in back-office and operational roles. This imperative is not unique to HP—it's essential for any company that wants to be around in 2 or 3 years—but it's particularly urgent given the size and global scope of HP's employee base of 300,000 workers in about 175 countries around the globe. And with about 65% of HP's revenue coming from outside the U.S., Hurd knows he needs to beef up international sales teams no matter how much flak he takes from it here at home where critics will screech about the ruthlessness of sending "our jobs" overseas.

2) Net loss of 3,000 jobs. I'm not attempting to minimize the personal toll that each of the 9,000 HP employees will face—but I am saying that unless Hurd continues to make these hard choices and build the type of organization needed to succeed in the future rather than just sustain the one that exists today, the resulting damage at HP will adversely affect far, far more than just 9,000 employees. Many news accounts glossed over the new jobs and focused instead on the old jobs being phased out by increasingly automated and efficient data centers. Even the supposedly industry-insider website GigaOm adopted this unimaginative and misleading template with its headline, HP's Transition To The Cloud Will Cost 9,000 Jobs. Oh well—I guess it's easier to go with sex-and-gore headlines instead of trying to explain what's really going on. Bloomberg went with "HP to Cut 9,000 Jobs and Take $1 Billion In Costs," the Wall Street Journal offered "H-P to Cut 9,000 Jobs, Spend $1 Billion in Restructuring," and, to ensure I spread the indignation evenly, we here at InformationWeek wrote, "HP To Eliminate 9,000 Jobs."

3) Job cuts phased over 3 years. The company's new data-center infrastructure and capabilities will come online over time, which means some of the affected employees will remain with HP for almost three more years. Again, it's brutal for those workers but it gives HP's 295,000 other employees far greater prospects for the future. In fact, I would argue that this extensive notice being given by HP is an example of enlightened corporate social responsibility.

4) The rise of HP Enterprise Services. A theme Mark Hurd has focused upon in the past several months has been the huge opportunity HP has to leverage its massive product and technology portfolio with a range of services that are coming into greater demand as more customers move away from the idea of owning, maintaining, and developing every single element in their IT operations. That combination, Hurd has said, is unmatched: those with bigger services businesses (IBM, Accenture) lack HP's product depth and breadth, and no company in or out of the services business can match Hewlett-Packard's range of hardware and software products. Hurd's acquisition of EDS two years ago has been the centerpiece of his large-scale transformation of HP and, again, his intentions to make the company not just a player in the enterprise services space but one of the top three in the world have been unmistakable. We outlined those intentions in a recent column called Global CIO: Hewlett-Packard CEO Hurd Shifts Strategy Toward Services.

5) HP understands its data-center challenge. Some companies, whether inside or outside the IT business, are dragging along behind them like millstones antiquated data centers that aren't up to the requirements of our online and always-on business environment here in 2010—but, those companies don't have a clue how to get started on building their way out of that expensive, complex, and daunting infrastructure. For HP, it's quite different—over the past five years, Hurd and CIO Randy Mott have winnowed the company's data-center population from 85 to 6, stripping out billions of dollars in costs along the way and installing HP's newest networking (hello, 3Com), storage, servers, and management hardware to optimize the environment for future needs. So they are entering into this billion-dollar upgrade with their eyes wide open and with extremely high confidence in the new levels of service they'll be able to deliver to customers. Here's how HP put it in a press release: "Over the past 20 months, we focused on integrating EDS and improving profitability," said Tom Iannotti, senior vice president and general manager, HP Enterprise Services. "Now that the integration is largely complete, we have identified significant opportunities to grow and scale the business."

6) HP's not done creating its own future. Over at the investor site thestreet.com, their reporter seemed to imply that Hurd was pulling a fast one on everybody: "Hewlett-Packard has grabbed the ax and gone back to the old playbook as optimism fades. . . . The return to cuts marks a reversal of CEO Mark Hurd's position last year when he told Fortune that he wasn't planning any further job cuts, but didn't "rule out workforce optimization if the economy worsens." Well, thestreet.com should know better: HP remains a huge work in progress under Hurd's direction and so far the results have been strongly endorsed by investors (share price way up), customers (revenue way up), and prospects (Hurd told analysts recently that he sees "very strong upside potential" in the services business). To capture that upside potential, HP has to have world-class talent, capabilities, technology, and delivery options—and to achieve all that, it needed to continue upgrading its vital IT infrastructure via its data centers, and to devote more of its employee base to sales and revenue generation. This is not about a lack of optimism or Mark Hurd slipping a sly one past some reporter—this is about a CEO with the courage and commitment to make unpopular choices to ensure his company is as well-prepared for the future as it can possibly be.

It's why Sam Palmisano, Hurd's CEO counterpart at HP archrival IBM, earned every cent of the $24.3 million he was paid last year: because he made decisions not based on some antiquated lifetime-employement philosophy or on IBM's past but rather on the customer needs of the future. And while IBM is now powerfully positioned to continue to be a top-tier player in the business-technology market, Palmisano like Hurd has also taken a lashing in the press and among those who believe the world ends at the borders of the United States.

My heart goes out to the HP employees who'll be losing their jobs, and to everyone who's suffered a similar fate in this turbulent and challenging global economy.

But my hat goes off to HP CEO Mark Hurd for making the right call for all of HP, and for its future.

RECOMMENDED READING: Global CIO: Inside The Numbers: Mark Hurd's Top 10 Strategic Insights Global CIO: Hewlett-Packard Attacks Innovation Gridlock That's Killing CIOs Global CIO: Hewlett-Packard CEO Hurd Shifts Strategy Toward Services Global CIO: Why IBM CEO Sam Palmisano Earned His $24.3 Million Global CIO: Hewlett-Packard CEO Hurd's Strategy: The Infrastructure Company Global CIO: IBM Claims Hardware Supremacy And Calls Out HP's Hurd Global CIO: Hewlett-Packard's Hurd Creates Growth Engine In R&D Global CIO: Hewlett-Packard's Hurd Says Bad IT Means A Bad CEO Global CIO: Why Hewlett-Packard Must Articulate Its Enterprise Strategy Global CIO: An Open Letter To Hewlett-Packard CEO Mark Hurd Global CIO: Hewlett-Packard Recruits Microsoft To Raid Sun's Customers Global CIO: Oracle Dumps HP After Co-Creating 'Most Successful Introduction Ever' Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

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