 "With Hurd's Departure, HP Should Take 'HP Way' In New Direction: Ovum")
With Mark Hurd’s departure as HP CEO, many are evaluating Hurd’s tenure and how HP will move forward under new leadership. No one can dispute that Hurd succeeded in broadening HP’s portfolio while simultaneously implementing much needed cost controls and financial discipline. But HP’s constant organisational cost cutting under Hurd’s watch made pinning down its future direction much more difficult, and obscured HP’s past reputation (the well-known ‘HP Way’) as a cutting-edge developer of IT products and services. As it begins its search for Hurd’s successor, the vendor can use this episode to elevate innovation as part of a broader future strategy, giving confidence to customers, employees, and partners that HP will thrive in its post-Hurd era.
John Madden, Research Director, Ovum says, “Hurd’s departure may turn out to be a classic blessing in disguise.”
Successor should show HP is about more than cutting costs
Hurd’s departure may turn out to be a classic blessing in disguise. Hurd’s skills in cost control and performance metrics were just what HP needed when he took the reins in 2005, when the vendor was still struggling under the weight of its messy integration with Compaq. Once the company’s financial house was in order, Hurd also presided over the company’s rapid expansion into new markets through multiple acquisitions (EDS, 3Com, and more recently Palm), which has required more rounds of integration and inevitable restructuring; for example, the company announced in June that 9,000 additional positions will be eliminated (in tandem with a $1 billion services investment).
As a result, in the past several years the “HP Way” – so called for its longstanding, R&D-driven approach to developing and marketing technology and services – has been more synonymous with
cost cutting than anything else. While Wall Street cheers such focus and HP’s financials have been mostly healthy, it’s no way to grow a business in the long term, particularly among enterprise IT customers.
“It’s true that HP’s drive for ongoing efficiency and multiple acquisitions has allowed HP’s leadership team to fuel its multi-year strategy to be a premier low-cost and strategic provider in enterprise IT (broadly captured for example in HP’s Converged Infrastructure vision), with an emphasis on modernising data centres, IT management, and streamlined global service delivery. But as we’ve detailed in many Ovum reports, an air of uncertainty has surrounded whether HP can find long-term success with this strategy, with seemingly constant restructuring and organisational changes, all of which generates questions from customers about HP’s stability and service delivery capabilities. For some customers, Hurd’s departure will only add to those questions,” adds Madden.
Reassuring customers and the market about HP’s future
The HP board of directors seems keenly aware of the opportunity it has to set HP on a new, more innovative and growth-oriented path in the wake of Hurd’s unexpected departure. While CFO Cathie Lesjak takes the CEO position on an interim basis, the search committee will be headed by board member Marc Andreessen, a Silicon Valley pioneer known for his investments in cutting-edge companies and technology.
Speculation is building over whether HP is more inclined to select a long-serving internal executive as its next leader to provide a smoother transition post-Hurd, or bring in an external candidate (from Apple, EMC, IBM, Dell, or elsewhere) to deliver a jolt to the vendor’s long-term business plans. Hopefully Andreessen’s involvement will ensure that HP seizes this chance to position HP for long-term growth while tapping into its heritage and reputation as a Silicon Valley innovator – a reputation that has been diminished over the past few years with the near-constant drumbeat around cost control, acquisitions, integration, and reorganisation.
“As the search process commences (and the board has set no timeline for its succession plans), HP’s most important priority will be to reassure enterprise IT customers that any corporate turmoil will not impact HP’s ability to deliver products and services effectively. HP’s many IT partners and alliances, especially Oracle, SAP, and Microsoft, can be particularly helpful in getting out that message to the market, given their many large, joint global customers. A recent string of high-profile contract wins (the US Navy, General Motors) is another sign of customer confidence on which HP can lean. The vendor is already saying it doesn’t expect Hurd’s departure to negatively impact the company’s financial performance this year; concurrent with Hurd’s resignation HP announced preliminary third-quarter results that were 11% higher year-on-year and raised its full-year revenue outlook,” concludes Madden.