Why HP is different from IBM

When HP last year pushed IBM into second place in the supplier charts, some wondered where it could go from there. As head of a large chunk of the company, Ann Livermore should have some answers
Written by Colin Barker, Contributor

Last year, HP overtook IBM as the largest IT company in the world when its revenue hit $104bn (£52bn) for the year ending in October, with IBM trailing at around $98bn.

As head of the company's Technology Solution Group (TSG), 20-year HP veteran Ann Livermore sees few limits on the potential growth of the systems and software supplier.

Livermore, who joined the company in 1982 and has held various senior positions in the company, speaks from a position of some authority. The TSG division is a substantial part of HP with its focus on the systems used every day by companies around the world, the software and the growing services business. The other two divisions that make up the remainder of HP are the Imaging and Printing Group, and the Personal Systems Group.

ZDNet.co.uk caught up with Livermore at the company's Technology@Work event in Barcelona recently, and discussed the differences between her employer and IBM, the adoption of virtualisation, and whether HP is really interested saving the environment or just making more "green".

How do you see the current troubled economic situation? Do you think it will affect your brands?
[We see that] happening in the marketplace in terms of the financial services industry and some of the macro-economic trends associated with it. We are staying focused on the same strategy, so our strategy does not change as a result of this. In fact, we see many customers who have the capacity to still invest to save.

In a datacentre transformation what you are really doing is making an investment in a new infrastructure, to then be able to generate savings over a longer period of time. So those companies that have a strong cash position will often choose to do that.

The outsourcing business is also something that is a very attractive opportunity for many of our customers if they are feeling economic pressure. With our outsourcing business we can take on the datacentres and some of the employees from our customers and help them drive down the cost of their operations. So outsourcing businesses tend to be counter-cyclical in terms of their growth.

It is only recently that HP has seen outsourcing as key to its business. How is that going?
[Our] outsourcing business has many clients around the world. Procter & Gamble is a very large client for HP, where they have outsourced their entire, global IT operations to HP. We have an outsourcing relationship with Nokia, with Ericsson, with BT, with Unilever, with Pfizer. These are very large clients who have not just little but significant outsourcing relationships with us.

And we have smaller relationships with many companies where we perhaps just do the desktop or we just do the SAP or Microsoft Exchange. So we have the very large ones, like the ones I just mentioned, and then smaller ones based around the geography or business unit or the applications.

With the help of many different parts of the business, including services, you are now the biggest IT company in the world. You don't see any limitations in how big you can grow?
I think that HP's ambition is not so much size-focused. We aim to be number-one or number-two in every one of the markets we participate. So it is more in terms of leadership in the segments where we participate.

You know, we want to be not just the biggest but also the best. So when you look at the best, you want to have the best financial performance, you want to have the best customer satisfaction and loyalty and you want to attract the best talent. So what we are really after is to be the leading...

...IT company in terms of those three factors. And the customer loyalty and satisfaction is an important part of it.

It is one thing to be the size of IBM, but do you want to be like IBM? You used to be known as a very different company but now people tend to see you as very similar. How can you maintain the distinctiveness?
We are quite different from IBM. We are both very, very different companies. HP is, at its heart, a technology company and our focus is on technology for better business outcomes and how we deliver that.

When we look at our portfolio and where the markets are going, we think HP's portfolio is much better aligned to the future markets. We have zero percent of our business in mainframes. The percent of our business that is in blades, in x86 servers and our Integrity line, is 100 percent. So our technology is more focused on the things that are forward looking.

Similarly, our software business, enterprise management and automation are clearly right at the top of every person's problem list from an IT perspective because they have to drive down the labour costs inside IT. So we feel that our portfolio is more technology focused and on the services that wrap around that technology. So we think it is better aligned to where the market is going.

What is HP's take on virtualisation and where do you think the barriers are that stop people getting the maximum value from it?
A lot of people associate virtualisation with the server, and what really needs to be done by customers is to virtualise the entire datacentre, the servers, the storage, the networking and the applications. And the first problem customers run into when they start doing that is: "How do I manage this thing?" When I have physical servers sitting there, virtual servers and in a mixed environment, what do I do?

The software we provide is to manage both the physical and the virtual servers through a single pane of glass, a single set of software, and actually create the equivalent of a logical server environment that is being managed. We believe one of the biggest impediments has been: "How do I manage this thing once it is in production?" With our software, you are able to visualise it, plan the changes and actually make the changes in the environment.

Do you see a slow transition to virtualisation?
Yes, and most are going to find that the transition from physical to virtual is slow enough that they are going to have to manage both for a while.

But you do see virtualisation on the desktop becoming more popular?
Absolutely. We believe that for security reasons, for performance reasons, cost reasons, any of those can be compelling reasons for a virtualised desktop. Or a thin-client accessing the services you need from that device.

Could this be ideal for blades?
PC blades can be an implementation of virtualisation. HP made an acquisition a year ago of Neoware for our PC business to give us the capability to have a virtualised client environment. So we feel good about our blade business. Half of all virtualised environments are blades so when people are thinking of virtualising, very often they end up with a blades environment. That places us in a strong position.

Do you see yourselves making many acquisitions? What is the strategy here?
HP made 23 acquisitions over the past three years and on a continuing basis we are making decisions about whether we want to build something or [link] with someone in the industry or a partner or do we want to acquire the technology to be ours inside HP [all the time].

One of the strengths of HP is the strength of our balance sheet. We have a lot of cash and one of the results of that is the strength of our position to make acquisitions when they make sense.

How much cash do you have for buying?
Cash can be used for lots of different purposes. It can be used for M&A or for investments inside the company, or share buybacks or dividends. We have a lot of different uses of the cash. We never talk about any specific targets, or categories or size of the fields.

Are you seeing the green agenda with customers and do they see that in terms of savings, cost reduction?
Yes, there is a question of whether the "green" refers to the environment or money. Businesses need to have a cost justification for almost everything they do and the best outcome is when you have something that is both good for the environment and good from a cost perspective.

We have put a lot of focus behind power and cooling because we believe that from a datacentre perspective, being able to reduce the energy consumption...

...is a cost reduction for our customer and it is also good environmentally and we believe that is one of the key areas of focus for most businesses. So we invented some technology called Dynamic Smart Cooling. It can reduce the power consumption by 40 percent. We implemented it in HP in our new datacentres, our three pairs of datacentres, and we are going to reduce it by about 60 percent of our energy consumption.

That is just a huge effect and we think it is one of those examples that has both a cost benefit as well as the environmental benefit. That is a big focus for use and you will see us continue to focus on what we can do to reduce the power and cooling requirements in datacentres.

But do you pass the cost onto the customer?
Typically our revenue comes from either a consulting engagement to set up the whole cooling or some of the technology we can sell into the environment and then the customers catches the cost savings themselves. So they have to measure the return they make on the investment in services and technology but the ongoing saving is theirs.

Do you see there is political aspect as the datacentre is targeted for being wasteful of energy?
Well, that is true, but it creates lots of opportunities for us! [Laughs] Seriously, I think a lot of companies are worried because they have reached a constraint where they can't bring any more power into their datacentre and they need to do something to transform it. So it is high on the agenda of most CIOs.

How big is your software business?
It is over $2bn [£1bn].

You developed software for  helping customers implement SAP and Microsoft Exchange straight out of the box and tailored for different markets. What is the thinking behind these products?
Many companies don't want to take the time or the effort to build the next-generation datacentre for themselves and what they would love to do is almost the equivalent of plugging in the wall and having service delivered to them. Except that with the wireless capabilities we have today, you wouldn't even have to plug it into the wall.

So what they are really interested in is how can they use the application and do it in such a way that they don't even have to make any capital investment [and can] pretty much just turn it on immediately. So for those companies who are willing to pretty well, straight-up use an application, a standard version of it, these are two good offerings for them.

Originally we thought this was going to be mainly attractive to small and medium-sized customers, but what we also see is a single business unit, or perhaps a single geographic location [may be interested]. Or perhaps a large enterprise customer will be willing.

Do you see the company doing this with others, other than SAP and Microsoft?
That's our intention. Start with these two and see how it goes. The condition of this kind of service is how willing the users are to have a standard application package. And we know there are SAP and certainly Exchange customers who are very happy with the standard app.

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