2011 was the year of Hewlett-Packard behaving badly, and loyal enterprise customers are still reeling from the experience.
In 2011, HP changed its board, its CEO and its strategic direction. It acquired Autonomy Corp. for a widely reviled price of $10 billion and launched the much-hyped TouchPad tablet, only to pull the product off the market. HP publicly mulled selling off its PC division, sending investors into a tizzy, then said never mind. More recently, the company open-sourced its WebOS operating system and considered re-entering the tablet market. This all took place against a backdrop of an eviscerated stock price and plummeting sales, as customers thought better of putting their money in such an unstable company.
HP’s Enteprise Servers, Storage and Networking (ESSN) group largely stayed out of the headlines, but the turn of events shook up normally stalwart enterprise customers nonetheless.
“All this did concern me,” said Kevin Armour, chief technology officer at Paycor Inc., a payroll processing company that uses HP servers, PCs, networking equipment and management software.
Armour said he worried about the company’s tendency to react too quickly to problems, “and not really thinking things through,” such as when it took the TouchPad off the market after four weeks of lackluster sales.
Matt Lavallee, director of technology at MLS Property Information Network Inc., an HP shop, blamed HP’s former CEO Leo Apotheker and an “emotional and reactionary” board of directors for the company’s troubles.
“Apotheker sucked, and he sucked thoroughly,” said Lavallee, who watched with dismay as HP’s stock price fell 40% in Apotheker’s 11 month tenure.
In September, the HP board moved to restore order by replacing Apotheker with former eBay CEO Meg Whitman, which seems to have worked – at least for now.
“I’m feeling better now,” said Lavallee, who said his firm intends to stick with HP.
Ditto for Paycor’s Armour. He’d like to see HP settle on a mobile strategy, but in the end, “that’s outside of the bounds of what we do,” he said.
Move along, nothing to see
Generally speaking, enterprise IT shops tend to take executive comings and goings with a grain of salt, so HP’s 2011 management crises shouldn’t have any long-term negative effects on enterprise loyalty, said Richard Fichera, principal analyst at Forrester Research.
“Customers are desensitized to management shenanigans, to be honest,” he said.
Uncertainty at the top trickles down the ranks, but ultimately, “enterprise IT shops are very pragmatic about their operations” and aren’t prone to making rash decisions, he added.
Still, HP has some very real problems to face in 2012. Its Industry Standard Server and Business Critical Systems groups posted year-over-year declines in the fourth quarter of 2011 – 4% and a whopping 23%, respectively – signaling a fundamental weakness of HP servers.
On the x86 and blade side of the business, Cisco’s Unified Computing System is gaining steam, sometimes at the expense of HP’s BladeSystem. And when it comes to HP Integrity systems, Oracle’s decision last spring to stop developing its software on Intel Itanium chips – the basis of HP Integrity servers – has some HP-UX and OpenVMS shops eyeing the exits.
“Basically, anybody who can wait on buying a new system is waiting,” Fichera said.
Oracle can’t take all the credit for HP’s moribund fourth-quarter sales, said Dan Olds, principal at Gabriel Consulting Group. Rumors that HP will deliver new Integrity systems in the first quarter of 2012 may also have put a damper on things, he said.
“Probably the biggest winner in this situation is IBM,” Olds added.
IBM now shares the number-one position for worldwide factory revenue with HP, based on IBM’s strong 14% year-over-year Unix server revenue growth, according to the most recent IDC Worldwide Quarterly Server Tracker.
An HP-erian Odyssey
For HP to regain its enterprise mojo, it needs to resolve the Oracle situation. The first attempt came in November, when HP unveiled Project Odyssey, which aims to bridge its Itanium and x86 businesses by bringing traditional enterprise capabilities to Linux/x86 environments.
Under Project Odyssey, HP plans to integrate 32-socket Intel Xeon-based blades with existing HP Superdome 2 enclosures. Odyssey also includes work to port HP Serviceguard, an HP-UX high availability suite, to Linux, said Forrester’s Fichera. Other Odyssey projects include:
- a more scalable c-Class BladeServer enclosure;
- bringing HP nPartitions and HP Crossbar Fabric to x86 environments;
- and improving system availability by embedding HP Analysis Engine for x86 into system firmware.
The timing of all these Odyssey projects will vary, but the end result will be “a net positive” for HP enterprise customers, Fichera said.
In the meantime, HP shops are keeping their fingers crossed that the worst is behind them, and that HP is once again heading in the right direction, MLS Property Information Network’s Lavallee said. Because for midmarket shops like his, he said, “there’s really no other place to go.”