Bringing home the business

Carly Fiorina, CEO of Hewlett Packard has been working hard to resurrect the company’s reputation as a power to be reckoned with in high end computing accounts. But is the delivery of Superdome going to be enough to move HP out of the shadow of its Unix rivals?

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By  Greg Wilson Published  November 26, 2000

Carly Fiorina, CEO of Hewlett Packard has been working hard to resurrect the company's reputation as a power to be reckoned with in high end computing accounts. But is the delivery of Superdome going to be enough to move HP out of the shadow of its Unix rivals?

Hewlett Packard has got itchy feet — the HP sales force wants to walk into more Internet data centres and be considered a serious player. Market rivals Sun Microsystems and IBM have been campaigning vigorously to position themselves as the de-facto Internet infrastructure providers.

But with HP mulling over a possible $18 billion acquisition of the consulting arm of PricewaterhouseCoopers, the release of it’s much touted Superdome high end server under its belt and armed with a utility computing pricing structure, it’s clear that with Carly Fiorina at the helm, the company is making a dash to dominate the Internet data centre.

Since taking over the CEO role at HP 14 months ago, Fiorina has spent her time reinvigorating the company and reminding HP and everybody else that the company had a lot more in its product portfolio than printers and PCs. With the introduction of Superdome, the company is certainly hoping to prove it’s got what it takes.

“If we’re going to compete in the Unix business, we’ve got to play to win. And that means we’ve got to know what it’s going to take to beat Sun and IBM,” Fiorina said just prior to the unveiling of Superdome.

The advent of Superdome fills out HP’s high end, big iron product range, which by Fiorina’s own admission was, “large enough to drive a truck through.”

Superdome, which won’t be available until December of this year, will come in three different configurations, ultimately scaling to 64 processors, 192 PCI slots and 256 Gbytes of memory.

The initial shipments of the box will be running on HP’s PA RISC processors, but the future longevity of the machine has been ensured with IA-64 compatibility. “This box is IA-64 ready and that is key,” says HP’s local marketing manager for the enterprise group, Graham Porter.

“If you look at what Sun and IBM are doing, their processor roadmap is not IA-64 compatible. To actually change from their current processors to IA-64 requires a lot of work on behalf of the customer — source code, binary code — it’s not compatible. Hewlett Packard is the only major vendor that’s got this.”

Although HP has benefited from its joint development work with Intel to ensure a long life span for its Superdome box, users are going to have to wait for the upgrade to HP’s UX Unix operating system before taking full advantage of the promise of the hardware platform.

“It’s like the Unisys ES 7000 — you’ve got a situation at the moment, where the platform offers potential functionality that the operating system cannot support,” explained Gartner Group research director, Andy Butler.

“Superdome as a box is a formidable competitor to the best that IBM, Sun and Compaq has to offer. But it’s going to take HP 12 maybe 18 months before HP can pack all the capability in the operating system and the fundamental software that will let it be that competitor,” predicts Butler.

According to a preliminary report from Gartner Group, at the time of the launch, the current partitioning is modest, but HP is promising virtual partitioning down to the individual processor by the second quarter of 2001 and dynamic reconfiguration of nPartitions and hot-swappable CPU modules around a year later.

But slow rollout of partitioning technology will prove to be a handicap on the early successes of Superdome in the market. Although analysts are still predicting great things from HP’s biggest weapon in the high end computing game to date, there are doubts whether the company can initially make gains on arch rival, and leading Unix vendor, Sun.

“Superdome is going to keep [HP] credible as a high end platform, but they will realise that Superdome doesn’t put them clearly in the lead,” says Gartner’s Butler.

But HP’s competitors in the race for the Internet infrastructure space aren’t standing still either.

With all the major launches this year, all the vendors have been targeting the high end space dominated by Sun’s E10000 Starfire, and HP like the rest is looking to emerging from the shadow created by Sun’s high end box.

But despite the release of technically newer and superior products, from the likes of Compaq, IBM and now HP, Sun has continued to take market share.

“The reality is that through 2000, Sun should have had a bleak year. But we all know they haven’t. The last three quarters have been 35%, 38% then 42% growth — these are incredible numbers that demonstrate Sun is growing its Unix business quite healthily. But in an Unix market that isn’t even growing at a quarter of that amount, [Sun] is clearly taking substantial market share of its competitors,” commented Butler.

“Sun’s platforms are old and are technically out classed by the platforms of the other three top vendors, but it’s not stopping them getting the sales. It out-markets its rivals in virtually every department. [Sun is] extremely clever marketing organisation,” Butler adds.

The persisting success of Sun and the belated introduction of UltraSPARC III into Sun’s server range, combined with the re-branding and technical enhancements IBM has been making to its server range over the last 12 months explains HP’s move to introduce Superdome without HP UX 11i.

Imagine this scenario keeping the HP executives up at night — if Sun is continuing to outstrip its rivals in the Unix space with three year old technology, what could it do when UltraSPARC III is integrated into its entire product range?

“What it really comes down to is that HP has been forced to launch the Superdome about six to nine months earlier than they would of liked,” says Butler.

“In a perfect world HP probably would have liked to stick with its existing portfolio into 2001. But it was becoming increasingly clear to HP throughout this year that Sun was going to finally manage to get the UltraSPARC III roadmap out of the door. HP also knew that IBM is working on another version of the S80 — the fact is HP knew that its competitors weren’t standing still,” explained Butler.

The Superdome launch is merely the latest chapter in HP’s efforts to arrest the growth of Sun. Throughout the year, HP has worked to refresh its Unix product line, taking full advantage of its development relationship with Intel. But the time is approaching for HP to execute on its enhanced product range and take marketshare back from Sun.

HP’s Porter is more than well aware of the situation. “We have done a lot of work [but] we’ve now got to implement it. We have to take marketshare, particularly from Sun,” says Porter. “We actually have the right products, we can go after Sun, watch this space.”

But going forward — as with the other Unix vendors — the physical box is increasingly only going to be part of the solution. The software and the services are going to make up any where between 60 and 70% of the whole sale, says Porter.

While HP’s Dubai based operation is busily increasing its own enterprise service team, back in Palo Alto, Carly Fiorina is making a much bigger bid to build the company’s services operation. As talks progress on the proposed $18 billion acquisition of PwC industry pundits are already hotly predicting the possible outcome.

If successful, the deal will bring HP closer to the likes of IBM Global Services in its ability to handle comprehensive, multi-vendor projects. However, the risks of buying a consulting company are huge. Simply put, if HP cannot convince the consultants to remain within a combined HP/PwC services organisation, then HP is wasting its money.

“If they get it right, it will be a great master stroke, one which will set [HP] measurably above the likes of Compaq and Sun,” says Butler. “But there are a great many dangers ahead… HP is tying to turn itself into another IBM, Siemens or Unisys. The question is first of all, will they manage to keep the loyalty of the PwC staff, because at the end of the day a consulting organisation is nothing without the people. If you lose the people there is nothing left.”

There are other possible dilemmas facing the proposed merger. For example, what will happen to the existing $2.3 billion HP services organisation? And will HP be able to create a services company with the same level of autonomy as the other hardware orientated services organisations have done?

With the deal yet to leave the negotiating table, HP’s local operation is limited in what it can say about the proposed deal.
At the ground level, HP has been actively creating an enterprise services business, which has gone from three people in 1999 to nine currently, with further recruitment very much on the cards, says Dr. Albrecht Ferling, general manager of HP Middle East.

“We have strong plans to grow our professional services business here, there is no question on this. We can provide a services focus on all areas of HP with our professional services.”

But in the Middle East, HP is lagging behind the likes of Sun, IBM and Compaq in terms of its professional services organisation.

However, according to Ferling, HP is capable of mobilising professional services resources from Europe to fulfil the needs of local customers. Plans for offices in Saudi and Egypt to open early in the new year should further enhance the customer facing presence of HP’s high-end business.

However, HP is chasing the market here in the region. Although the company claims several high end accounts in the region’s banks and telco segment it would appear as if the company still has to crank up its enterprise business, particularly for its RISC/Unix platforms.

According to Porter, services delivered in conjuntion with HP’s consulting group and its local partners are going to be the killer factor in growing the local enterprise business. “We do need to grow the business, we have got a lot more sales people on the ground, and we have a lot of projects,” says Porter.

“We are looking at projects where hardware becomes only 20 to 30% of the deal. The rest of it is based on applications, that we will provide or source using our Hewlett Packard consultancy business. The implementation and the project management — those are the services that are bringing in the business.

The hardware becomes part of the deal. This is very much part of the challenge, we have sales people out there working on vertical markets. We haven’t made a lot of noise about our successes but we do have a large number of important customers in the region: military, PTT, government customers that run their business on our equipment.”

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