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HP Set To Be Split, Transformed


August 4, 2015  


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Las Vegas – November 1 of this year will mark the end of an era. After 75 years, HP will cease to be. Two new companies, Hewlett Packard Enterprise and HP Inc., will rise in its stead. CEO Meg Whitman announced the date in June, during her keynote here at the company’s annual HP Discover conference.

“We are living in an era of relentless change,” she told attendees. “We need IT solutions that can move at the speed of business.”

As previously announced, Whitman will be president and CEO of Hewlett Packard Enterprise, and Dion Weisler will head up HP Inc., with Whitman acting as chair of its board. The split separates the printing and personal systems division (HP Inc.) from the company’s enterprise offerings including servers, storage, security, services, and cloud.

“HP had no choice, as rapidly evolving market forces would have resulted in continued brand and market position erosion had it simply maintained its original organizational structure,” says Carmi Levy, an independent technology analyst. “The company needed to do something to snap it out of its old-think mindset. A cosmetic update to the org chart would have been inadequate. To the company’s credit, it recognized the severity of its situation and made the bold decision to cut deeply and quickly, and to rebuild itself in a very different image.”

Analysts at IDC Canada see both opportunities and challenges in the split. They like the fact that the newly-minted Hewlett Packard Enterprise will have a board, executive team, management and all other employees solely concentrated on enterprise IT. Yet, they point out, it needs a cohesive set of differentiators.

“In terms of differentiators, HP is a very large ship, not known for making very fast turns,” says Dave Pearson, research manager, enterprise storage and networking, at IDC Canada. “They play in almost every enterprise space, and are never near the bottom of the heap.  However, it’s extremely difficult for such a widely integrated company to become known as ‘The (pick your technological poison) Company’ with so many moving parts.”

Part of the goal of the separation is to simplify and focus, said Whitman. At the same time, she doesn’t want to abandon HP’s legacy, and its tagline, “Invent”, is still top-of-mind. “We will continue to invest in and invent new ways to compute.”

For HP Inc., the goal is to be the world’s leading personal system and printing company. Products such as Sprout, an all-in-one computer and 3D scanner for designers, will loom large in its plans, although more mundane things like the award-winning EliteBook Folio laptops will still receive the attention they deserve as well, company officials said.

Hewlett Packard Enterprise’s scope is broader, and, notes Pearson, it has a lot of solid offerings. “They have an extremely strong services division, they have a new structure for go to market under development, and they are trying to gain strength in key areas such as the software defined data centre and hybrid cloud,” he says.
“Becoming a top of mind organization in one or more of these higher-growth, higher-margin areas will be critical to recapturing some of their previous success.”

Still, he and his colleagues point out that enterprise computing as a whole is not currently a high-growth market, although some segments, like security and hybrid cloud, are exceptions to that rule. IDC believes that Hewlett Packard Enterprise is well-positioned to differentiate and take share in those areas.

However, says David Senf, vice president, infrastructure solutions group at IDC Canada, “Canada is in the early days of the highly competitive hybrid cloud market, so HP needs to trumpet loudly its capabilities and strategy here to secure its share.” With four out of five IT managers in Canada identifying hybrid cloud management as an important element in their success, according to IDC research, it’s a fertile market.

Levy agrees. “The separate entities will have to invest in sustained messaging to ensure customers, prospects, suppliers and other key stakeholders know who to deal with under what circumstances,” he says. “Much like the circles around a divorcing couple must endure a period of uncertainty as relationships are redefined, so, too, will those who deal with HP in any material capacity. Orchestrating this process can be a drain on resources, and it’s something the newly twinned companies will have to account for and contend with.”

IDC believes that HP needs to put its security offerings front-and-centre as a full hardware, software and services offering. It points out that HP’s security portfolio has been performing well; it leads the Canadian market in intrusion prevention systems, for example, and has taken additional share in recent quarters.

However, HP ranks third overall in the Canadian IT Services
market next to IBM and CGI. IDC says that security is a key area to focus on to help it move up the ranks – and the new Canadian security operations centre (SOC) will make a positive difference.

“Moreover,” Senf says, “security of identities, data and applications in the cloud is a critical element in hybrid cloud. HP has a long history in both management and security with a large portfolio of offerings.”

On the innovation front, says Levy, “The Machine is possibly the best example of why the post-split HP will do just fine.”

The Machine, currently a project in HP Labs, uses a new architecture that puts storage first, not compute, and does not differentiate between working memory (RAM) and data storage. It will ultimately use a different memory technology (memristors), a new kind of operating system, and rely on optical connections, not copper.

HP Labs director Martin Fink says that it will be used for massively parallel processing that’s not possible today, such as managing gate crews at every airport worldwide to ensure flights do not get stranded on the runway when they are off-schedule, as well as for current workloads.

“Its radical architectural roadmap suggests that the spirit of innovation that placed the company at the apex of American technological leadership is alive and well,” says Levy. “It speaks volumes about the leaders who remain committed to not simply milking past achievements, but who are just as driven today to rewrite the way work gets done, and have the courage to invest in longer-term initiatives that will allow it to carve out entirely new markets.

“It takes guts to strike out in an uncharted direction, and The
Machine is as much proof as anyone needs that post-split HP will retain the kind of heart that built it into a leader in the first place.”


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