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Blog Post

Why IBM Is Right About HP Strategy

Evolution to Cloud-Centric Services Model is neither cheap nor quick

HP Chief Executive Officer Léo Apotheker recently outlined new corporate strategy which fundamentally changes the roadmap for HP as we have known it. Some analysts are calling it a "seismic shift". I am not sure I would use those words in light of recent events. However, I do agree that this seems to be a bold departure from HP's recent and current market strategies. Hence I think it is important to understand and analyze this shift if you are a CIO or CTO from consumer perspective. Equally important to analyze this if you are ICT provider from a competition or "cooptition" perspective.

HP seems to backing this shift on its Cloud strategy with a good measure of focus on Connectivity and Software. The official press release for instance states, "The convergence of cloud computing and connectivity is fundamentally changing how IT is delivered and how information is consumed." There also seems to be an acknowledgement that customers and enterprises are not going to be shifting overnight to Cloud Computing Model and Mr Apotheker hence is also focusing on a Hybrid Model which in HP's view, "is a hybrid environment that combines the best of traditional environments with private and public clouds will be the prevailing model for many large enterprises for a long time." One of the highlights for me is what Mr Apotheker calls an "Open Applications Marketplace" that integrates consumer, enterprise and developer services.

In summary Apotheker outlined a four-point strategy for HP as follows:

  • Continue to manage and optimizing today's traditional environments;
  • Build and manage next-generation cloud-based architectures;
  • Enable (read consulting and integration) transition to hybrid computing models;
  • Delivering the connected world from the consumer to the enterprise.

As a standalone piece of strategic intent nothing much wrong with it. It seems to be ticking all the boxes of current market and consumer trends. However, the only problem as I see it is that this is not and cannot be a standalone strategy for the company of the size of HP. It needs to be integrated with what the current investments, assets, legacy and strengths stands for. And this is where the "Catch 22" lies for the HP Board, CEO and strategists. They have to "keep the winning strategy". But they also have to respond to growing the Software as a Service (SaaS) threat from it's competitors both current and emerging. And more importantly they have to also play to their credibility and relationships in the marketplace. And while doing this balancing act the risk which many analysts are seeing is "will HP cloudwash same old stack it has been trying to sell?"

Another set of questions is about how does HP plan to realize this strategy? Has HP taken into account the cost and risks of such transformation? HP investors haven't been impressed recently. The quick departure of Apotheker's predecessor Mark Hurd last year weighed heavily on the company's stock, which is down more than 20% over the last 12 months. Alternative view from major competitors is also interesting to analyze. In an interview with The Financial Times, Mike Daniels, SVP of IBM's Global Technology Services and a potential successor to CEO Sam Palmisano, took a few shots at HP - particularly its approach to integrated software and services. "It's not like we have a company that has a software strategy and then a services strategy or a hardware strategy," Daniels said. "I think it would take a long time for anybody to accumulate the kind of capability that we have.

In summary is I think the issue that IBM is raising is the most important for HP strategists to consider. Credit to them for outlining a bold departure to a Cloud and Connectivity Model; however, to realize this strategy it will take significant investments, time and development of capabilities that will genuinely offer an integrated offering to the marketplace. In its absence this will simply be another "cloudwash". The question is will investor's be patient and willing to support this strategic but expensive move?

References:

IBM lays down challenge to rival

More Stories By Amitabh Apte

Amitabh is a business focused technologist with close to fifteen years of delivery and leadership experience in large scale enterprise IT. He specialises in business and technology strategy definition, governance, architecture as well as methods and tools. Currently he is the Chief Technology Officer in Fujitsu Services Private Sector Division in the UK&I.