Can HP's cloud float?

HP chief executive Leo Apotheker has announced plans for HP to take a leading role in defining the future of information technology. Cliff Saran and Warwick Ashford report on how HP is changing

Hewlett-Packard (HP) chief executive officer Léo Apotheker has announced plans for HP to take a leading role in defining the future of information technology. Cliff Saran and Warwick Ashford report on how HP is changing.

Speaking about his strategy for the first time since his appointment last October, Apotheker is departing from the approach of his predecessor as CEO, Mark Hurd, by concentrating on revenue growth, rather than cost-cutting.

Cloud computing will form the foundation of HP's future direction, but the leader in enterprise servers is hoping he can encourage IT departments to continue to buy HP servers, by offering a hybrid environment. Apotheker says HP's hybrid approach combines the best of traditional environments with private and public clouds, and will be the prevailing model for large enterprises for a long time.

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He says HP will continue to develop its hardware, software and services businesses. "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. HP is well-positioned to be the trusted leader in addressing this opportunity," he said.

HP plans to develop a portfolio of cloud services from infrastructure to platform services, and to develop and run the industry's first open cloud marketplace for consumer and enterprise services and applications.

The supplier will build and acquire the software it needs to help companies write and run applications using its cloud service, and also plans to build webOS into a leading connectivity platform by putting the software onto a broader range of products and potentially delivering up to 100 million webOS-enabled devices a year.

Research and development

Ovum chief analyst Carter Lusher said, "There was frequent mention of the importance of innovations, along with research and development, at the HP Summit; there was no mention of dramatically increasing R&D spending." R&D was cut from $3.65bn (5% of revenue) in 2003 to $2.96bn (2.3% of revenue) in 2010. However, Apotheker said that for the current fiscal year HP would be increasing its R&D budget.

One of the major criticisms of HP toward the end of Hurd's era was that innovation and product pipeline had suffered due to cuts in R&D. When asked about R&D during a Q&A session, rather than making a bold statement about increasing spending, Apotheker defended the reduced spending under Hurd, saying it was appropriate - but he also said he expected R&D expenditure to grow faster than revenue.

"The devil is in the details and at this stage," said Mark Fabbi, vice-president and distinguished analyst at Gartner. The big challenges, according to Fabbi, include security services; maintaining policy and compliance; transfering data; load balancing and optimising the performance within and between data centres. "It's easy to draw on the whiteboard, but in practice [lack of these details] is why we haven't seen cloud ramp up in adoption," he said.

"It's not clear just how many of these details HP has integrated into its system. It's a good start, but we will need to see more as it rolls out its solution and exposes the details."

Enterprise services

HP stressed a number times during the strategy announcement its open and agnostic approach to building on its EDS (now known as Enterprise Services) acquisition, according to Fabbi. "While HP didn't make public disclosures on all the details it is safe to assume it will partner with some cloud IaaS (infrastructure-as-a-service) players." He expects HP to develop its own service where the ES division would play a role, to compete with the likes of IBM, Oracle, Microsoft, Amazon and Google.

Quocirca analyst Clive Longbottom says the strategy demonstrates HP's response to Oracle's entry into the traditional HP hardware business. "HP is making a stack play to compete against the new Oracle - all the way from hardware through operating systems to application and service provision."

The path to webOS

For Longbottom webOS, acquired from Palm, is a fundamental component of the strategy. He said, "HP is betting a very large part of its future on webOS, as far as I can see. It is late to the game with something that the majority see as just a mobile play, and will have to throw a lot of money at it to encourage developers to join the party. It will also have to ensure that it can easily port existing applications over to webOS if it becomes a broader platform play."

While it is a mobile operating system, Longbottom expects webOS to move through to other end-points (PCs, laptops), devices (printers, cameras, etc) and from there on to appliances (networking kit, storage, edge of network equipment) and then to the server itself. "Once this is done, HP has a scale-out stack as well as a scale-up - it can reach out and start to integrate into other environments as well, such as electronic point-of-sale systems and home entertainment," he said.

The private cloud

"Apotheker made a public case for personal cloud online services that work together to orchestrate and deliver work and personal information across personal digital devices (such as PCs, smartphones, and tablets)," Frank Gillett, a principal analyst at Forrester Research wrote in a blog post. The divide between work time and personal time is being blurred. Through a personal cloud, people can access their business and personal contacts and calendar appointments from any device.

Gillett said, "This is a very small example of how CIOs will need to adjust to the consumerisation of IT, as IT will need to engage with products and services that individuals choose and use, in order to better support employees in the work place."

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