HP Cloud Update: Solid Strategy and a Top-down Mandate

Over the past week-plus, Saugatuck participated in several Cloud Analyst events and briefings by Hewlett Packard, in person and via teleconference. As of today, all the information imparted to us is no longer under NDA by HP, so we’re ready to share some of our initial thoughts.

The most important information that HP has delivered to us, and to their clients and partners, is that the firm now has a comprehensive, coordinated, cross-unit Cloud strategy. This is massively significant for HP itself, and for its customers and partners, and should lead to dramatically increased efficiencies and profitability for HP along with increased competition across most Cloud IT markets.

For several years, HP has been a leader in Cloud IT development and offerings. Back in 2003, they were one of the pioneers of Cloud infrastructure. Since then, they have rolled out a range of important and valued Cloud-based services, from printing to storage to hosting and more. Depending on whose revenue or customer numbers you read, HP has quietly become one of the larger providers of Cloud IT in the world.

Yet today, when we survey and interview user enterprise executives about Cloud IT Master Brands, HP’s name is sometimes in the mix, but typically in a niche fashion. In a recent deep-dive interview program (conducted in January 2012) with progressive large-enterprise CIOs, a quarter viewed HP as a “winner” in the Cloud, whereas twice as many cited that the firm would be challenged by Cloud IT (see 1038CLS Large Enterprise CIOs Weigh-in on Impact of Cloud on IT Strategy / Planning, Part 2, 15Mar2012 – CLICK HERE if you are a premium subscriber to Saugatuck CRS-CLS service, or CLICK HERE to purchase a la carte). And in our own initial forays into understanding HP’s Cloud strategy and portfolio just a couple of years ago, HP itself was unable to provide any sort of unified message, offering portfolio, positioning, or pricing.

In many ways, the Cloud problem for HP has been a lack of coordinated organizational structure and management, leading to internal fragmentation that basically drove business units to pursue their own Cloud paths. HP’s overall Cloud business grew, but became very inefficient and expensive to manage; innovation in technologies and approaches suffered accordingly; and inconsistency in positioning, pricing and relationship management became too common. From a marketing perspective, HP was not effectively able to position itself as a market leader.

None of this was killing HP, but it has been preventing the firm from improving its profitability, and from taking advantage of being one of the largest full-line Cloud IT Master Brands (along with IBM). And in a marketplace where Cloud Is King, customers, shareholders and partners took notice.  

I don’t mean to gloss over or minimize the effects of the top-level management challenges that HP has been through. The CEO circus has left town, but it generated at least three rings of activity and distraction that helped drive and extend the lack of Cloud coordination under the big HP tent.  

So what’s different? Why’s it going to work this time? Now that we’re out from under the HP NDA, I can share the core of what we have learned from sit-downs with the HP executives who are working hard to make things happen. These include the following execs:

• Ajei Gopal, SVP & GM, HP Software
• Biri Singh, SVP & GM, HP Cloud Services
• Mark Potter, SVP & GM, Infrastructure Software and Blades, HP Enterprise Business
• Matt Haines, VP Engineering, HP Cloud Services
• Pete Karolczak, SVP & GM, Infrastructure Technology Outsourcing

The net is that these executives and their groups have a strong mandate from CEO Meg Whitman and complete support of the Board when it comes to making Cloud part of HP’s core business and technology strategy, and that mandate includes ensuring that the former organizational, cultural, sales, marketing, and of course technological, barriers must no longer exist.

Mandates are one thing, actions and results are something else. Are they doing anything about it? In our interactions with HP, we see the investments and improvements being made, and we see the executives responsible for those creating and refining structures, processes, and practices that make coordinated Cloud efforts de facto and de rigueur within HP operations and compensation. The executives, their groups, and their bosses are all being measured by HP’s Cloud success or failure.  And they are building the organizational, cultural and operational foundation to make that happen.

Let’s be clear: HP was not failing at Cloud. Their Cloud business is measured in the billions annually, in its many forms. But without this top-down mandate and resulting Cloud convergence internally,  they would soon find themselves falling farther and farther behind IBM, and likely Dell, and possibly Oracle, in terms of market position and influence, and eventually revenue. It would be possible to recover from that, but it would also be extremely costly and time-consuming. Customer and partner relationships would suffer, and eventually HP would lose its ability to innovate and compete in the most critical IT market.

A complete and consolidated HP Cloud strategy was needed, has been developed, and is being implemented. It’s the best news that HP employees, customers and partners could have received about Cloud. Saugatuck clients will get the lowdown on useful details, including offerings, go-to-market approaches, business models and market impacts in the coming week-plus. Stay tuned.