HP Separation Steaming Ahead

(see our initial comments on the news of the HP break up here:)

At the HP Discover event in Las Vegas earlier this month, the last before the break up of goliath HP into two organizations - HP Enterprise (HPE) and HP Inc. (HPI) - CEO Meg Whitman (the future CEO of HPE) took pains to highlight the progress that has been made in preparing for and organizing the separation, including:

• The leadership structure and workforce advancement are completed
• HP currently has 12 board member (6 to each company); is in the process of appointing a further 12 to complete the two new company boards
• New partner-driven GTM approach in some markets
• HPE has a new brand (see below)
• A new PartnerOne alliance (like an airline alliance), with a partner playbook of FAQs
• Supply chain: 100% of direct suppliers and logistics suppliers have been contacted
• Automatic cross-license of patents across the two new HP companies (neat analogy of HP now having a “two car garage”)
• Separation of IT systems “the long pole of the tent”, Around 5,000 of HP’s internal IT department is involved in this program, one of the largest separations ever involving 570 projects, 2,800 apps, 75k apps interfaces, 50k servers, 6 DCs, one of the largest SAP estates globally, 172k SI tests for connectivity, etc. HP is documenting what it is doing
• The experience being gained in such a massive project is of interest to some clients…HP also has external client references for this: Del Monte, who executed its own split into two separate entities for its food and pet food businesses. Achieved in 8 months, HP ES helped separate the infrastructure using HP Helion Cloud; Del Monte now has a cloud first strategy HP ES also helped in the Kraft/Mondelize breakup.

HP expects to file Form 10 later this summer with an internal operational deadline of August 1, three months in advance of the Nov 1 deadline (new FY).

New Hewlett Packard Enterprise Logo and Brand: Green is the Color

The new logo has the outline of a green rectangle placed over the name of the company. Green stands out as being an unusual color for a logo in the IT industry, and it also has positive connotations of sustainability, growth, and profitability.  

In a rare blog post in April, Whitman wrote “We needed a design that would express our renewed commitment to focus and simplicity. And we needed a logo that would be as transformative, flexible and agile as we are becoming… Finally, the logo needed to work across all the ways we would use it.”

As well as the new color, the new logo goes back to the full Hewlett Packard moniker. At HPDiscover, Whitman declared that the logo brings out “the right legacy of HP and the exciting future ahead.”

Hewlett Packard Enterprise​ Positions on Four Transformation Themes

With HP Enterprise Services (HP ES) head Mike Nefkens acting as MC, execs from across HPE explained how the entire company is now going to position in GTM along four new “transformation areas” which between them cover HP’s view of where the market is headed

• Transform to hybrid infrastructure – servers, storage, cloud, DevOp, apps, even BPS, both traditional and cloud enabled. Helping clients manage their existing IT estate at lower cost while managing the migration to cloud
• Protect your digital enterprise (cybersecurity, also risk management, backup and recovery)
• Empower the data driven organization - big data and analytics; Haven architecture. Autonomy on Hadoop, moving to S4Hana. Also apps and business processes
• Enable workplace (why not workforce?) productivity - digital, mobile, SaaS, HP Networking importance of Aruba, implementing across HP for wireless infra

The intention is to pivot all of Hewlett Packard Enterprise around these four areas. Certainly, this was the most integrated presentation spanning HPE companies that we have yet seen, and is a clear development on the “services attach” approach that HP has referred to in previous years.  The 240 or so largest accounts in HPE are led by AGMs and the client approach appears to be more service-led (TS, PS as well as HP ES) than it has sometimes been previously.

The “cloud” word and the “new style of IT” phrase that have dominated HP ES presentations in recent years have evolved to “new style of business” (requiring, of course, the “new style of IT”). There appears to be a greater focus on understanding the client industry, while positioning as the “friend of the CIO”, for example bringing them lessons learned in managing the split.

The Idea Economy and Time to Value

In another theme in Day One, Whitman highlighted how in “the idea economy there are few barriers to let ideas to become realities (new capability, product, service, or even industry) in a world where IT … can be acquired as services”. Time to value is thus both the big challenge, and the big opportunity.

Two examples of HPE capabilities that underpin this time to market value proposition are in

• DevOps, for composing apps very quickly, using micro services
• Testing: a LeanFT automated testing tool. HP claims that LeanFT will identify defects in application code at the early stages of development when tweaking code is an easier process

Indicating Hewlett Packard Enterprise's commitment to open source (and HPE reaching out to the developer community) , HP announced Grommet, a OS UX framework for enterprise applications, which CTO Martin Fink claimed HP developed to address disparities in UX across HP products (it includes source technology for HP OneView). Fink highlighted that, in the spirit of open source, it is not being called HP Grommet

“Composable Infrastructure”: next gen “Converged Infrastructure” for the hybrid world

Fink also introduced the concept of “composability” (using the analogy of composing music) as applied to managing converged IT infrastructures, the focus of a multi-year initiative called Project Synergy. A “unified API” lets applications automatically access, deploy and then release compute, storage and networking resources - it treats infrastructure like code. Currently, applications running on converged infrastructure solutions like HP's ConvergedSystem can do so via an administrator or some other tool.

The HP Composable Infrastructure API works with configuration management and orchestration tools to abstract the compute, storage and fabric resource and provide these resources dependent on an application's performance, cost and security requirements. This gives a cloud-like flexibility to deploying and redeploying resources for both cloud apps and traditional applications. Part of the emphasis on “Transform to hybrid infrastructure “, HP presents Composable Infrastructure as enabling clients to bridge the gap between traditional and modern business applications, which need faster, more frequent upgrades.

HP ENTERPRISE SERVICES

Developments in Positioning and Go To Market

HP Discover also provided the opportunity for HP ES to give an update to analysts.

Mike Nefkens highlighted:

• The value proposition across the portfolio revolves around the four new transformation areas, noted above. This is a clear development on the “Advise, Transform, Manage” positioning of last year (see our comment here:)
• Work continues to improve profitability using the usual operational efficiency levers
• While selling costs are also down (18% y/y last FY, and under budget by 13%), HP ES is revitalizing its sales operation under Larry Stack
  • Sales force efficiency has improved
  • “Strategic Enterprise Services” (SES) signings in cloud, migration to cloud, security services, Apps SI, analytics and data management, industry solutions, have all seen double digit growth in signings. An entry point into a new client now is often security (where, for example, it used to be workplace services)
  • Win rates are improving (win loss rate is up 19 pts y/y, some of this from qualifying out early, with new business signings up 10 pts)
• Revenue continues to be impacted by contract run-off, EMEA and declines in traditional ITO, but performance is expected to improve in H2 FY 15. FY 2015 revenues are likely to be down 4-6%, and FY 2016 should be flat  (which is good compared to immediate peers)
• CSAT and client loyalty metrics are improving,  with Voice of Customer up 8%, NPS up 9 pts
• An ongoing reduction in the number of incidents (down 36% since Q4 FY12)
• The setup of the seven global practices as part of the drive to improve cross-selling.

Revitalizing Sales at HP ES

Areas of focus include:

• Getting sales execs to understand the client’s buying criteria
• Developing GTM collateral, use cases, references client presentations, brochures etc.
• Making it easily available, via a sales portal that provides access to a searchable database
• Training and certifying client facing teams by using Spartan belts (up to black belts) and leadership support and coaching. There has evidently been a huge focus on sales development at HP ES.

Other developments at HP ES include

• Co innovation with clients in “Lighthouse deals” (e.g. Workforce 360 with UK’s MOD, Virtual Private Cloud with DB) which H ES will seek to replicate.
• In a significant change, all practices have to have a client attach for a new offering
• A “Pathfinder program” with tech startups
• Investment in automation, including data center automation and RPA in BPS
• More noise about partnerships for solutions, e.g., security diagnostic assessments with FireEye.

Some areas that are still work-in-progress:

• The total cost of workforce as percentage of revenue is its lowest since FY 2010, but still several points above many competitors.  A large proportion of the $2bn cost take out over the next three years will be deployed on reducing labor costs through offshoring and pyramid management (see here )
• The seven practice areas remain under invested; reducing delivery costs has to come first. Will we see a closer alignment between the seven practices and the four transformation themes over the next few years?
• Partnerships, both with technology partners - expect to see news of an expanded partnership with Microsoft – and with consultants/SIs, to augment business consulting capabilities
• HP ES still has some ‘old school’ infrastructure management contracts that need attention.

All in all, while the next few years will continue to be a challenging journey, HP ES has achieved a huge amount in the last 18 months and is much better positioned to compete for the “new style of business”. And Hewlett Packard Enterprise as a whole is clearly working on going to market in a more integrated fashion.