Q&A: Marc Waters – HP UK & Ireland head of business-critical servers

Waters : "It would be churlish for me not to admit that Cisco clearly has got a value proposition that they're taking to market."

As head of the UK and Ireland’s business-critical server division, Marc Waters has his mind focused on his customers' cost control issues and the entry of Cisco to the market.

Computing talked to Waters about the state of the server market, how HP would meet the challenge from Cisco, and why he thinks the Itanium server is not yet dead.

What’s the state of the server market currently?
Marc Waters: Looking at the Gartner and IDC figures around Q1, you can see there’s obviously been a decline in total spend, and that’s not just for the high-end server market – it’s across all server sectors. From an HP perspective, what matters to me is how our market share is playing out.

And how do you see HP’s market share playing out?
In Q1 we’ve seen a significant increase in market share in the Risc/ Epic-based server sector, specifically in the mid-range and volume spaces.

The volume market is still dominated by Sun, from a revenue perspective, but we're a strong number two in this sector. In the high-end sector, we were leading, but now IBM has drawn level.

Will Cisco succeed in denting everybody else's market share, following its server launch earlier in the year?
From an HP perspective I think not, because I think we're pretty strong in the market. Equally, it would be churlish for me not to admit that they've clearly got a value proposition that they're taking to market.

It'll be interesting to see what direction they take with this platform in the next six to eight months. We're leading this market, but the worse thing you can do when you're in that position is be complacent. Having Cisco competing with us in this sector I think will bring out the best in HP.

Could Cisco's presence lead to buyers being able to get better deals on competing non-Cisco server kit?
Maybe. IT departments up and down the country are always trying to drive aggress ive price deals. I think there was enough competition out there before the Cisco launch to allow firms to be aggressive. I also think the swing point will be, how you demonstrate value, and if you come back to the high-end server strategy that HP has, it is about delivering more value, but being very competitive price-wise.

If you ask me to sum up my strategy in a sentence, we're trying to deliver critical computing, but benefit from volume economics – by that I mean the bladed strategy that's worked well in the volume and x86 space.

We've got blades in the high-end sector now, and a lot of these components are consistent, so we can start to bring the massive economies of scale in the x86 market segment to the high-end business sector, and start to change some of the economics there.

What is the most common problem that CIOs come to you with?
I don't think they come to us with problems in that sense, it's more about what they're looking to do with their businesses and what their priorities are.

I think right now everybody's looking at their costs. In the high-end market, one of the problems is that there's a lot of legacy infrastructure that has a high operational cost associated with it. A lot of organisations are also looking at what sort of journey they need to go on with their datacentres.

So how they deal with the problem of legacy infrastructure could benefit from some of the technology that is around now.

What are your views on how the mainframe market is developing?
It's a big market for us, we've done 40 mainframe migrations across Europe this year, and we have a competency centre in Madrid.

If you look at something like a mainframe modernisation programme, there's got to be a pretty strong business case there. The reason is that the operational costs on some of these platforms are incredibly high, and if you can migrate to more of an industry standard infrastructure, there's big savings to be had.

I've sat with a number of firms looking at their total IT estate, specifically trying to understand the cost profile around their mainframe system.

What are your views on cloud computing?
The trend towards clouds – public or private – is something that HP is looking at. One of the benefits of clouds is that potentially you haven't got hardware lock-in, but potentially you've got cloud lock-in.

I think there's a market opportunity there and I think our acquisition of EDS helps our proposition in this area. I don't think it's a trend that's driving massive behaviour right now, and I don't think you've got large organisations moving everything to a cloud.

It's great for startups, though – if I launched a startup tomorrow, I'd have cloud-based customer relationship management (CRM) straight away.

It'll also be interesting to see how the public sector adjusts to this trend. Organisations need to be thinking about what the cloud means for them, but I don't think it's creating a fundamental shift at this point in time.

Are Itanium servers dead?
They're not dead – they're an essential part of our high-end strategy. I'll take a step back in response to that question and say, if you were the chief executive of a major hardware company, would you want a strategy whereby you were having to design and manufacture and take out all the costs associated with your own chipset?

Looking at how the competitive market has shaken out 10 years on from that decision being made, would you go for the value and division of labour? You've got Intel with its core competence of chip design and manufacture, and the scale behind that, and HP with it's core competency.

I don't think I'd swap the business model now, and actually you could argue that that a business model like this, was a contributory factor to Oracle ultimately acquiring Sun Microsystems.

Remember the Compaq merger? At the time there was quite a negative view of it, like the Itanium market, but with the benefit of hindsight, I wouldn't change either of those two strategies.