At the recent HP industry analyst conference, a theme woven
through Meg Whitman’s presentation was that HP is on a journey. She repeated
several times during her speech that they’ve made progress but they still have
a lot of work to do. To CEO Whitman’s credit, in the early days of her tenure
at HP, she clearly set public expectations for HP’s turnaround when she stated
that this was a 5-year effort. This move bought the company the time and space
to work on the turnaround, while keeping investors and media at bay
temporarily.
The strategies and progress-to-date shared by HP at the
analyst conference confirmed that HP’s turnaround plan is still “in progress”.
We saw evidence of both the progress, as well as the work that HP still has to
do. HP has made progress since Ms. Whitman took over the helm in Fall 2011.
Today, HP has settled down from its very public “dramas” and strategy shifts
that unfolded before Whitman took over. Led by Whitman, the restructuring and
refocusing efforts have stabilized HP, which puts HP in a position to move
forward. Getting its financial house in order enables HP to invest in R&D
and strategic acquisitions, both of which Whitman stated publicly that it is
doing (R&D) and is its intention (acquisitions). And both are necessary investments
for HP’s future growth and competitiveness.
However, as challenging as it was for Whitman and her team
to get HP to this point, the next steps will be just as hard, if not harder to
achieve successfully. Several of the challenges HP faces are part of the
turnaround effort, while others are due to market and technology trends.
Because of space limitations, a full discussion of all HP’s challenges isn’t
possible but here are two of them.
Growth:
Investors and the market are relentless in demanding
continuous growth from public companies. Now that the company is stabilized,
the demands for growth cannot be far behind. HP’s size and breadth of products
make this a complex issue. However, for discussion’s sake let’s look at one
area where HP will be challenged – its x86 server line.
The challenge is and will be delivering revenue and profit
growth from its x86 line, despite the downward pressures on profit margins and
increased competition. This challenge is not unique to HP, it’s a challenge
faced by all U.S. server companies. IBM’s solution to this issue was to get out
of this business by selling their x86 server business to Lenovo. HP will
certainly face fierce competition from Lenovo and other low cost Chinese server
manufacturers, as well as white box servers. Downward price and margin
pressures will continue and possibly intensify.
However, HP Moonshot’s lower power consumption, lower cost,
etc. servers could be one of HP’s solutions to this challenge. Moonshot is an
example of HP using innovation to change the economics and form factor of x86
servers. But HP must improve its Moonshot traction in the market by more
effectively communicating its value to customers.
Technology Trends: Cloud, Mobile, Security, Big Data
Two years ago when HP began their turnaround journey with
Meg Whitman, several technology trends were on the rise. Out of necessity and
practicality, HP scaled back their acquisition activities during this period.
However, in the past two years HP’s competitors were and continue to be very
active with acquisitions to build up their Cloud, Mobile, Security and Big Data
capabilities.
With its financial footing firmly re-established, Ms.
Whitman indicated that HP will be engaging in acquisition activity once
again. HP’s temporary hiatus from
acquisitions could mean that HP is now playing “catch up” in these trending
areas, unless HP Labs has been working overtime developing new Cloud, Mobile,
Security and Big Data capabilities. It’s not clear in which of these scenarios
HP finds itself in today – on par or behind. The good news for HP is that most
of the large vendors’ Cloud, Mobile, Security and Big Data initiatives are
still “in-progress” and the end results are still to be determined.
Moving Forward
HP is in a much better position than it was two years ago -
finding itself on firmer footing. Yes, HP has made progress and is moving
forward. But the progress must continue as it heads into the next phases of its
turnaround.
The question is whether HP can effectively transcend across
product and organizational structures to build its cross-HP initiatives,
strategies and solutions to address customer needs. During her address to the
industry analysts, Meg Whitman mentioned that they are shifting the company from
a product and technology focus to a solutions focus. Although this is easier
said than done[1],
and the objective is not an easy slamdunk, it appears that HP is headed in the
right direction.
In any case, it is interesting to watch HP and its competitors building their new initiatives. But the ultimate judges of the success of HP's efforts are and will be their customers.
[1]
Over the years, many vendors have said and attempted this product to solution
transformation without achieving it.
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