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Why HP recruited former SAP CEO Léo Apotheker

"Bold" appointment of Apotheker as CEO suggests a major software push...
Written by Tim Ferguson, Contributor

"Bold" appointment of Apotheker as CEO suggests a major software push...

HP's appointment of former SAP CEO Léo Apotheker as its new president and CEO is a "bold" move that suggests the company is looking to software - and the cloud - for growth, according to analysts.

Apotheker will take up his post on 1 November and will succeed Cathie Lesjak, who was named interim CEO following the departure of previous CEO Mark Hurd in August. Hurd was recently appointed co-president at Oracle.

Apotheker spent two decades with SAP and was CEO from April 2008 to February 2010. He resigned from SAP after the board decided not to extend his contract as a member of the company's executive.

Robert Ryan, lead independent director on HP's board, described Apotheker as a "strategic thinker" with "proven operational discipline" and added that he's "exactly what we were looking for in a CEO".

New HP CEO Léo Apotheker - his arrival could lead to HP ramping up its software efforts

The arrival of former SAP CEO Léo Apotheker as HP boss could lead to the company ramping up its software efforts
Photo credit: HP

"Given HP's diversified products and services, its financial strength, and its leadership position across markets, no other company is as well positioned to drive - and profit from - the revolutionary changes underway in the marketplace," Apotheker said in a statement.

Under Apotheker's leadership SAP struggled to win new customers and suffered delays to the development of its Business ByDesign on-demand ERP system. The company also failed to move all its customers to the more expensive Enterprise Support.

But Andrew Butler, vice president at analyst Gartner, doesn't believe that Apotheker's unspectacular stint as SAP CEO reduces his qualification for the HP CEO role, because he had previously been held in high regard.

Butler said Apotheker demonstrated the ability with SAP to develop whole new areas of competency and focus without compromising what it did well. "I think some of those talents are going to be pretty important inside HP," Butler told silicon.com.

The major area where HP could potentially develop with the help of Apotheker is software. Butler said Apotheker's appointment "demonstrates HP's growing commitment to software, to having a credible strategy of either creating their own applications or working with application vendors".

It could even prompt HP to look at developing its own software stack to compete with Oracle's chip-to-application approach. Butler said Apotheker is "well qualified to take them down that path if that's what they so choose". Butler cited Apotheker's acumen in linking up with...

...software and services companies as a sign of what's to come. He said HP could benefit from deeper strategic alliances with the likes of Microsoft, SAP and even Oracle to extend its software competence.

Writing in a blog, Gartner managing VP Martin Reynolds agreed that HP's software business has the greatest potential for growth.

He said although HP has built a portfolio of cloud technologies the present focus is on cutting the cost of computing - rather than the new services that cloud could bring about. Apotheker's experience with SAP could allow the company to develop more innovative cloud-based software.

Ovum principal analyst Michael Azoff agreed that software was the key. "Appointing a CEO from an enterprise apps background suggests where HP wants to go next," he told silicon.com.

Azoff also said the cloud could be a major feature of HP's future strategy under Apotheker. "I would say cloud computing has to be a big play for HP. Beyond the hype, the delivery of SaaS is critical," he said.

HP sign in front of the company's headquarters in Palo Alto

The appointment of Apotheker is a bold move that could shake up HP's business, according to analysts
Photo credit: HP

The new CEO could also lead a shift in the market focus of HP. Gartner's Reynolds predicts that, under Apotheker, HP could copy SAP and focus on cloud technology and selling it to CIOs and above, rather than limiting itself to the present approach of engaging with lower level business execs.

Not everyone thinks Apotheker's appointment is the best approach for HP. Quocirca founding analyst Clive Longbottom described the appointment of Apotheker as "a strange choice" considering HP's lack of success as a software vendor.

He said HP probably needs someone to help it sell to more senior executives but suggested Apotheker isn't necessarily the person to achieve this goal.

Longbottom was more positive about the appointment of the "razor-sharp" Ray Lane - a managing partner at Kleiner Perkins Caufield & Byers - as a non-executive chairman on the HP board.

Analysts all agree that the appointment of Apotheker is a more adventurous approach than would have been expected of HP.

"If they'd have put someone in who either was totally predictable or frankly wasn't going to be particularly revered or respected by the other vendors, then we could easily have said this was a bit of a dull decision and I don't think that's the case," Gartner's Butler said.

"It's a bold move. It will force other vendors to go and re-examine their own strategies for competing with HP. The very fact that it's going to create a stir within the industry - there's a degree of goodness in that alone," Butler added.

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