HP's strategy: A credibility check

HP's strategy: A credibility check

Summary: Hewlett-Packard CEO Leo Apotheker laid out a master plan this week that had a heavy dose of cloudspeak, WebOS and software. How credible is the plan?

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Hewlett-Packard CEO Leo Apotheker laid out a master plan this week that had a heavy dose of cloudspeak, WebOS and software. How credible is the plan?

Now that a few days have gone by, it's worth doing a credibility check on the strategy and assess whether HP has the chops to turn its 30,000 foot view into real execution.

On Sunday, I previewed the HP meeting. The hot topics going into the meeting were:

  • Software.
  • Services.
  • WebOS.
  • Innovation.
  • The PC business and Apple envy.

Following the meeting it's worth expanding that list by one topic to include cloud computing.

The overall message from the HP meeting boils down to the following:

  • HP intends to be a cloud platform and SaaS player.
  • The company has a lot of software intellectual property that hasn't bubbled up to become products.
  • Apotheker thinks HP can be an analytics player.
  • HP is going to force feed WebOS with its distribution.
  • The company still values its consumer business and doesn't intend to be "a junior player" in the tablet market.

Now for the reality check. Following HP's meeting and all the cloud chatter there were two responses from observers. The skeptical crowd said that HP was cloudwashing the same old stack it has been trying to sell. As for HP's plans to become an app market for consumer and enterprise apps, critics said that any freshly minted MBA could have spun Apotheker's strategy.

The folks who were more constructive about HP said that the company was delivering a broad strategy and could fill in details later. Apotheker said that HP's cloud strategy---including an app market launch---would become more evident in 2011 and 2012. These observers also thought HP could become a credible cloud platform provider.

Here's a look at the big issues for HP and whether the company's strategy day clarified anything.

Software. Going into the HP Summit it was clear that the company would talk about building and buying a software business. Analysts were expecting a mix of open source and SaaS.

Instead, HP talked a lot about analytics. "Analytics is a huge space that is poorly served today," said Apotheker. After his keynote and Q&A session, Apotheker told me HP would attack analytics via SaaS, on-premise and appliances. The timeline: 12 months. Apotheker noted that a host of HPers spend their days on analytics.

More importantly, HP didn't talk about reinventing the wheel. HP has no interest in competing with Oracle and SAP. The Oracle relationship will revolve around coopetition. Apotheker hinted that SAP and HP will become tighter. That outcome isn't much of a surprise since HP now has a bevy of SAP veterans---including Apotheker---running around the executive suite. Related: HP to go software shopping: Here's the potential hit list

Cowen analyst Peter Goldmacher said:

From the perspective of a software investor, HP has decided to leave the high end of the enterprise to IBM and Oracle in favor of a broad based platform strategy designed to create a variety of low cost cloud computing alternatives focused on connectivity to a myriad of end points including PCs, mobile devices and printers. While the company intends to continue to compete aggressively at the high end of the server market, it explicitly stated it has no intention of owning transactional apps or purchasing legacy software franchises. This comment is sure to dampen much of the take out discussion in Enterprise Software. We believe HP's platform will appeal to the broadest spectrum of users and use cases possible. While going after the low end user will open up new markets, the creation of a low cost "build/test/deploy" platform with enterprise chops will definitely matter to Oracle and IBM over time. Execution is a lot harder than vision, but the vision is compelling.

Credibility check: HP's software plans were credible and logical. HP outlined a high level software vision that made sense because it didn't involve disrupting existing software giants. In addition, it's quite believable that HP has software intellectual property that hasn't been turned into products. The analytics execution remains to be seen, but the vision works. Cloud computing. Much of HP's software strategy revolves around cloud computing. HP's software path includes creating app markets for the consumer and enterprise. HP also aims to be a platform as a service for non-mission critical workloads. Why could this strategy work?

  • Oracle and IBM won't go there into the platform as a service thing.
  • HP has the infrastructure to be a credible platform.
  • HP has the CIO relationships to be an enterprise class platform.

Why HP's strategy won't work?

  • Apotheker didn't divulge much detail on the strategy.
  • It's unclear whether HP can establish an app market place.
  • HP's strategy may just be cloudwashing.

Wells Fargo analyst Jason Maynard summed up the HP Summit as a meeting that was "mostly cloud washing with a side of $7 in earnings per share in fiscal 2014."

Maynard added:

HP’s aspiration is to be the platform for cloud and connectivity from the consumer to the SMB to the enterprise. In practical terms, this means the CloudSystem hardware solution for public and private clouds along with a new Amazon-like public cloud offering for storage and compute in late 2011.

Credibility check: The jury is still out on HP's cloud strategy. It's quite possible that HP can offer these services and gain traction. However, we just don't know enough about the cloud computing tactics to make much of a call. We'll await further information about the cloud effort. HP's CloudSystem is an integrated bundle of hardware and software for data centers.

WebOS: The big news out of the HP Summit was that the WebOS would aim to be on 100 million devices. Given that HP's shipments of printers and PCs were well above 100 million in 2010, that figure is easy to hit. HP can put the WebOS on every printer and PC and have distribution. Related: HP's WebOS target: 100 million devices

What remains to be seen is whether an army of WebOS printers and PCs creates an ecosystem. The sweet spot for developers is mobile. HP doesn't have the smartphones or tablets to give the WebOS mass distribution. You can create distribution for WebOS, but it's unclear whether developers can create apps that can take advantage of the PC, printer, tablet, smartphone connections.

Credibility check: The WebOS will get distribution simply because of HP's will. I'm doubtful that developers will follow. There are only so many platforms for developers to chase and the WebOS is clearly playing from behind.

Services: Apotheker didn't spend a lot of time on HP's services unit. And the presentation from services chief Ann Livermore and Tom Hogan, enterprise sales chief, sounded very familiar. In a nutshell, services will target verticals and focus on application projects and value added offerings.

The bottom line for HP is that services has its sales challenges. HP will hire more sales people and focus on verticals.

Credibility check: HP Services will continue to chug along, but don't expect a high growth business. It remains to be seen whether HP's services magic fix is more sales folks.

Innovation. Apotheker gave a few plugs for HP Labs, but he can't reverse years of starving R&D in a few months. At Apotheker's press conference, he said:

As I have said numerous times, R&D is not just measured in dollars. It's about effectiveness as well and it's about the effectiveness of the entire R&D process from the innovation point to bringing it to market.

I indicated early on that we need to get a little bit better in that. I believe that what you have seen today, looking at some of the technology around vertical, demonstrates the capability that HP really has. And when you put our team work together, in this case with what is still today a partner vertical, we can actually make things happen really quickly.

You will see much more of this coming out of HP in the future. We will focus on driving a lot of innovation straight into the market in a significantly more effective manner. This being said, in this fiscal year we are actually investing more into R&D; our R&D expense grows faster than our revenues. And we wanted to do this explicitly as there are many technologies that we really want to capture.

Credibility check: Wake me up when HP doubles its R&D spending from 2.5 percent of revenue to 5 percent.

Tablets and Apple envy. Despite a lot of speculation about ditching the PC business, Apotheker was very clear that the consumer business matters. In fact, the consumer-enterprise continuum is only getting tighter. Apotheker said the consumer market is an innovation source for the enterprise.

The big question is whether HP can deliver a credible No. 2 option to Apple's iPad. The plan here is to go enterprise with HP tablets and target key verticals such as healthcare. In other words, HP and Dell have roughly the same tablet plan. Dell, however, has Android and HP may be able to use the WebOS stack to deliver some goodies specifically for businesses.

On the consumer side, HP tablets have a shot. Sure, HP is playing from behind, but the WebOS is a nice system that works well on a tablet. In addition, Android Honeycomb has been buggy. If HP can get its TouchPad to market quickly it has a puncher's chance to become a distant No. 2. Simply put, no Apple rival has stepped up to the plate yet with anything stellar. HP has a limited window to strike on the consumer front.

Credibility check: HP's tablet plan is solid, but it doesn't have a lot of time to screw around with its enterprise efforts given Research in Motion's PlayBook is coming.

Topics: Hardware, CXO, Tablets, Software, Operating Systems, Mobility, Mobile OS, Laptops, Hewlett-Packard, IT Employment

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25 comments
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  • It'll never work, and I speak as an expert on explosives

    The difficulty in selling analytics is that it represents an existential threat to various fiefdoms, managers, and experts throughout the enterprise.

    Take database marketing, an obvious candidate for the application of analytics. Somewhere in every such company there is a room full of "data base jocks" who compose magnificent SQL statements to extract just the right people for a specific mailing. Now here you come to sell them what amounts to a 'bot' that will not only do their jobs faster, but better. Well, guess what. They will oppose you at every turn, did up horror stories about other analytics deployments, and so on.

    Sales forecasting is another obvious application. Except that here you are encroaching on the turf of the Sales VP, who uses the forecast to manipulate which products get built and which don't. He doesn't like your analytics either.

    Obviously, analytics projects do happen, they do get sold, and many of them are quite successful. But selling them is a long, slow, slog through corporate mud.
    Robert Hahn
    • agreed...

      @Robert Hahn You are are totally right and not only that, what in HP's history shows them to be a viable and smart long term investment into their software? Let's face it, HP is a hardware company and diving into this space where bigger software companies already dabble is just putting the company in a position to be knocked down on the hardware front. Perhaps Microsoft needs to buy a hardware company. After all with Oracle taking on Sun and Linux and now HP moving away from Windows to their WebOS, perhaps Microsoft needs to get on the same playing field as Apple and make their own hardware. Problem is with all these companies going this route, the consumer in the end will lose getting stuck with substandard something or other... If HP was truly on track, they would be coming up with cool hardware gadgets and approaching software companies to develop the software to go with it. Just like a consultant...I'd take a specialist any day over a jack of all trades unless of course I want them to just do everything adequately and don't care if they really do anything exceptionally well. HP has lost its vision...sad.
      GeiselS
      • RE: HP's strategy: A credibility check

        @GeiselS@... <br>HP actually has a long history of software development and having ground-breaking technologies; some examples are Openview Enterprise Manager (any real-world bake-off at a customer site against Tivoli would be won before the IBM folks could even show a console), HP New Wave (if you run any version of Windows higher than Windows 95 you have HP to thank for the GUI), PCL (and HP-GL), (if you print chances are good you are using one of these control languages), if you've ever used a tape drive directly attached to a Windows NT (or any flavor of Windows Server) you used HP software (check out TapeTools, an amazing collection of utilities HP never really bothered to sell), 64 bit Linux, AppIQ, Mercury, and a whole list of others HP bought or created and then relegated to obscurity. No, HP has a long history of making decent software, their biggest issue has always been one of execution, they have consistently been unable to sell the products that they make because of... well, it would take too long to go into that. It still boils down to Business Week's statement about sushi; if HP sold it they would call it "Cold raw fish."

        *edited to fix typo
        914four
    • RE: HP's strategy: A credibility check

      @Robert Hahn

      Actually, you've just convinced me they may do it! HP is gargantuan, and the forecasts of key components in key regions have been off by ORDERS OF MAGNITUDE for years at a time in some cases. HP will probably get adequate ROI if they can get analytics right and just use it internally.
      tkejlboom
    • RE: HP's strategy: A credibility check

      @Robert Hahn 100% right on, you nailed it.
      bjames3
  • Pipe dreams in my opinion

    So I think we can safely say much of HP's focus may be just pipe dreams. For a company like HP who sells a lot of consumer and business tech. They really have done very little inovative. They spend very little on R&D and their products are not revolutionary. They are followers much like the rest of the PC industry. Will this dramatically change? I doubt it.
    jscott418-22447200638980614791982928182376
  • RE: HP's strategy: A credibility check

    I said it before and I will say it again... HP is an hour late and a dollar short!!! Dell is kicking the butts in both enterprise and consumer sales... An this coming from a long time HP product user (with exception to PCs which are "Home brewed"
    puppadave
    • RE: What happens when the cloud doesn't work?

      hm,.... goodd!
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      drumandyou
  • RE: HP's strategy: A credibility check

    "There are only so many platforms for developers to chase and the WebOS is clearly playing from behind."

    I'll never understand this kind of argument. Before Apple had an app store, the same could be said of them vs. the then-existing ecosystem of Palm OS 5 apps (sans the catchy lingo to call them that)?

    In any league, race, competition, there is one leader and a whole bunch of competitors. EVERYONE except the leader is "behind" the leader - should they all just pack up and concede?

    Apple got to be the leader by NOT swallowing "we're playing from behind, therefore we have no chance."

    Every leader is challenged to keep on top of their game, lest competition innovate and gain. Remember when MSIE was the browser market share dominator? What kind of internet would we have if Opera and Firefox and Chrome thought "we're playing from behind, might as well not bother"? And here we are, with MSIE at, what, 60% market share, healthy competition, and each browser with its piece of the pie (and, for the record, I use Opera, and Firefox, and Chrome, and I do not use MSIE).

    webOS is innovative. It will get distribution. There will be, thus, a pool of demand potential. In a free market, where there's demand, there will be supply, and those who get on the supply side of the market will win share.

    Having said all this, clearly I'm a lonely dissenter amongst all the comments here that do not credit HP with the capability to be successful with this plan. If I'm wrong, I'm wrong, and we shall see what we shall see.

    http://nontechietalk.blogspot.com
    Non-techie Talk
    • RE: HP's strategy: A credibility check

      @Non-techie Talk <br><br>I am in agreement with your assessment of the "late to the party" crowd. That might hold true for developers trying to overthrow Google from their basement, but you can't count out these mega-corporations. In fact, it's often less risky to enter a market that has been established than to create the market yourself. They have a lot of money to carve out their slice of the pie.<br><br>You mention IE (disclaimer: IE9 user) and I remember when Netscape was the defacto standard. I remember when ICQ created instant messaging and the awesome wars between MSN Messenger and AOL IM. I remember Word Perfect and Lotus 1-2-3. I used Borland C++ when Visual Studio was awful. I did tech support for AOL and I actually had a MySpace account. I remember when there was no way that the xBox would ever overtake the Playstation and the Wii was a joke (can you believe they named it that?). I remember when Ballmer laughed about the iPhone. I remember lots of things.<br><br>webOS definitely has potential, but as I said below they *have* to fix the developer story and they need something more compelling than a tablet that *might* be a little better than an iPad.
      Rich Miles
      • RE: HP's strategy: A credibility check

        @Rich Miles I hear you. My apologies for poo-pooing on MS in my diatribe. Indeed, MS (albeit through not-always-above board-methods) has entered spaces late and ended up dominating, WordPerfect and Lotus 1-2-3 are fantastic examples, I certainly remember!

        Bottom line here is, starting "from behind" is not, in and of itself, a guarantee of failure; so please, for the love of business history reality and higher thought, techie journalists really ought to quit using that party line.
        Non-techie Talk
    • RE: HP's strategy: A credibility check

      @Non-techie Talk
      I fully agree with your point, and I'm a developer! However, HP must provide good dev. tools to potential WebOS developers. Apple's and MS's success in terms of building a substantial app ecosystem has relied on the provision of excellent development environments (technically speaking). I'd be willing to look at WebOS if HP provides good dev tools for that platform.
      Eleutherios
      • RE: HP's strategy: A credibility check

        @Eleutherios I'm not a developer, so let me ask you - has HP's webOS SDK changed substantially from the SDK Palm put out before they were acquired?

        You're right about good development tools. Back in the day, Palm was king but the parameters were wide enough to accommodate all levels of 3rd party coding quality and Palm sunk as a result of its "buggy-ness" which may have been in part due to conflicts with 3rd party apps on any particular device.

        When iPhone first launched, the world wondered and waited to hear IF Apple would allow 3rd party development, and all eyes were on what their SDK would support.

        Well, that's all history now, they (magically) managed to allow 3rd party apps while still ensuring a narrow-enough SDK to raise their chances of maintaining a consistent user experience.

        So, we "users" can still appreciate what you're saying: the development tools - narrow enough to ensure stability, but broad enough to encourage developers to run with it - will be critical to seeing apps proliferate that capture people's imagination, productivity needs...
        Non-techie Talk
  • RE: HP's strategy: A credibility check

    <i>What remains to be seen is whether an army of WebOS printers and PCs creates an ecosystem. The sweet spot for developers is mobile. HP doesn?t have the smartphones or tablets to give the WebOS mass distribution. You can create distribution for WebOS, but it?s unclear whether developers can create apps that can take advantage of the PC, printer, tablet, smartphone connections.</i>

    As it stands now, the developer story is terrible compared to the competition. I haven't seen the beta of the new tools so perhaps HP has been fixing it over the last year.

    I like what I've seen of the Touchpad so far, but I haven't seen the "holy crap" feature that makes it better than the iPad. That goes with all tablets.

    You can create the Move -- a little better than the Wii but not earth shattering -- or you can create the Kinect. It is not a better Wii. It's an entirely new category. Sure you can complain about casual gamers or Kinects collecting dust, but entirely new categories of experiences will be created because of the technology and many of them won't be related to gaming.

    Apple has been doing this -- leap frogging -- for nearly a decade. The iPod is the defacto MP3 player. The iPhone is the defacto smart phone. The iPad is the defacto tablet. Everyone else is an also-ran compared to Apple.

    If HP wants to be the leader in consumer electronics then they need to do a lot better than putting out a tablet that might be a little better than an iPad. They need to create an entirely new class of experiences. I think Hurd cut that DNA out of HP and it's going to be a long, hard road to get it back.

    For now, if somebody is going to dethrone Apple it's going to be Google or Microsoft. Microsoft seems like they aren't even going to try until Windows 8 and Google needs some serious help in the user experience department -- the issues plaguing Google TV are symptoms of a systemic problem, not a hiccup. What gets me the most is that I don't find Apple's experiences all that compelling. They just seem to be the best of what's available.

    One last thing. Are the millions of printers running webOS really going to cultivate an ecosystem for developers?
    Rich Miles
    • RE: HP's strategy: A credibility check

      @Rich Miles wrote "One last thing. Are the millions of printers running webOS really going to cultivate an ecosystem for developers?"

      Good question! Again, there's no question that HP has their work cut out for them. But, remember that they became the largest PC vendor in the world with help from the strategic acquisition of Compaq, back when Dell was also growing as a major distributor. They attempted through that acquisition to also compete in the PDA space (Journada, etc). HP's picking up webOS wasn't a random shot in the dark, it can help power all their devices - PCs, smartphones, printers, with the kind of solid platform that currently does not exist.

      They have the technology and the distribution. What remains to be seen is whether they have the vision and management to work a plan and gain traction.
      Non-techie Talk
      • RE: HP's strategy: A credibility check

        @Non-techie Talk<br><br><i>"HP's picking up webOS wasn't a random shot in the dark, it can help power all their devices - PCs, smartphones, printers, with the kind of solid platform that currently does not exist.</i><br><br>This is something I agree with completely. HP is one of a handful of companies that has the potential to make this work. While I think it's a long shot, I still think it has a chance of working.<br><br>Since their announcement in February I have been paying attention. I have set up a developer account and have been waiting for them to get back to me on a developer device. I am hoping they get back to me soon.<br><br>Since I started this little adventure, I have noticed that the development experience is really jumbled. They have two development paths, the SDK (web development) and the PDK (plug-in development). Of course, you can do hybrids of those. This by itself isn't too different from Windows Phone Silverlight and Windows Phone XNA options.<br><br>What environment should I do my development in? Well, they have the online version (Ares), they have a plug-in for Eclipse called Aplanta, they have a PDK solution for Visual Studio 2008 (relatively minor modifications can get it working on VS 2010), and their videos often demonstrate creating things with the command-line tools and text editors.<br><br>I was able to get the PDK sample running in Visual Studio pretty quickly. Ares (the online tool) is pretty good but despite running in Java it doesn't run in IE and says it's been tested for Chrome 3,4 (my version of Chrome is 10). There is a plug-in for Eclipse called Aplanta that is my favorite environment so far, but my Eclipse doesn't have the right plug-ins to properly highlight Javascript and HTML so I'm working on that. The version of VirtualBox that is required is version 3, but the latest version is version 4.<br><br>I guess my point is that if they want to woo developers, they need to simplify the process. I should be able to go to their site, tell them I'm running Windows 7 - x64 and have it install everything I need. I would prefer those tools to be a step or two above command line and Notepad.<br><br>I am going to fight through the issues because I do see the potential and I think they will work out the kinks.
        Rich Miles
    • RE: HP's strategy: A credibility check

      Rich hit the nail on the head. While everyone was gushing over HP's margins under Hurd, few people looked at how he was doing it -- mainly on the expense side. His merger-and-aquisition strategy was driven by efficiency projections more than technology contributions. And much of HP's cost savings came from workforce reductions, including R&D and IT. Rich's term "DNA" was great. Bill and Dave fostered a culture of quantum innovation (ie, Apple "leap frogging" in recent years). Recovering that will take time -- and patience from the Board, not a given. I do think HP has opportunities in commercial SaaS, especially if they let the EDS team regain its mojo. Unfortunately, size does matter in turning a ship...
      StanJohnston
  • RE: HP's strategy: A credibility check

    HP's software business has never really contributed much revenue. Perhaps an acquisition or 2 is required...
    mschafer555
  • Good lck to them, and us.

    If nothing else the ipad has shown that millions of folk just need a web portal of sorts with little editing/creating of real data. That's gone in the face of many 'expert' views, mine included. So... keeping an open mind why wouldn't I want some of HP Web OS for the house at least? And why wouldn'y I expect that to have a place in the enterprise. Many things are being controlled from a web browser these days... so why not cut the cr$p and just load the browser in effect?

    I'm looking forward to an IOS style with creativity and PC style functionality. The best of both worlds. Whats wrong with that?
    johnmckay
  • RE: HP's strategy: A credibility check

    webOS rocks. I sure hope this puts it into the public so that the momentum will accelerate.
    Cantaffordit