HP strategy: A negative verdict

Analysts unimpressed at latest attempts to woo enterprise customers

Systems giant HP’s attempt to re-invest itself as a cloud service provider has received a mixed reception, with some critics arguing the company has too much baggage to reinvent itself quickly.

HP’s chief executive Leo Apotheker used his first major public address to set out his vision to turn the company into a provider of cloud services.

At the HP Summit in San Francisco on 14 March, Apotheker said the company plans to launch a public cloud service – which would rival offerings from the likes of Amazon – in the near future.

“We see clearly a world in which the impact of cloud and connectivity is changing not only the user experience, but how individuals, small businesses and enterprises will consume, deploy and leverage information technology,” said Apotheker.

Apotheker also stated that most enterprises will adopt a hybrid approach to IT, combining elements of traditional IT environments with private and public clouds.

Such pronouncements would chime with IT chiefs' view that enterprise IT will evolve over the coming years, said Dale Vile, managing partner at Freeform Dynamics. And that represents something of a change.

“HP, like other big vendors, has given up on trying to convince the world that everything will go hosted and dynamic, so is now positioning itself around hybrid architectures,” said Vile.

But not everyone is convinced that the company will be able to move from today’s HP to become a cloud-based IT provider.

Part of the problem for the firm is its legacy, said Anthony Miller, managing partner of analyst group TechMarketView. HP is today in the PC, printer, services and software businesses.

So irrespective of Apotheker’s grand pronouncement, “we could see little on how he intends to get all the moving parts to mesh rather than grate,” said Miller.

The problem for HP, he explained, is that its investors value the profits it can wring from its printer business, making it hard for company bosses to invest significantly in less-profitable sectors, such as building a successful cloud business.

“Even then, whether the juggernaut that is HP can really dance in the cloud, well, that’s a different question entirely,” he added.

Apotheker said HP’s new strategy would see an increased focus on the networking and connectivity side of its business, as well as expanding its range of WebOS-based devices.

The focus on networking would create more head-on competition with Cisco, where IT leaders would welcome the emergence of more credible competitions, said Vile. But “it is not as if the connectivity trend has suddenly become more important this year than last year. This is marketing around an established macro trend,” he said.

As for WebOS: “Again, it’s not news to anyone that smartphones and slates are taking off, in both consumer and business,” said Vile. “More to the point is whether HP can catch up with Apple, RIM and Google.”

Apotheker’s failure to lay out a compelling vision of how HP can re-invent itself bodes ill for the company. It has been treading water since its previous chief executive Mark Hurd left under a cloud. Even then, Hurd’s greatest achievements at HP look to have been in streamlining its operations, not setting a strategy that will enable it to successfully navigate the seismic changes sweeping the IT industry.