Mark Hurd: Taking HP To New Heights
Hewlett-Packard CEO Mark Hurd sat down with CRN Systems Editor Damon Poeter and Editorial Director Kelley Damore for an interview at HP's Palo Alto, Calif. headquarters in mid-March. Here is that interview in full.
DAMON POETER: So Mark, thanks for seeing us. We wanted to talk to you -- your time is obviously very precious and we wanted to cover a couple things -- maybe cut right to something that's on the minds of a lot of channel partners and that's what's happening with Cisco. You've got the converged infrastructure plan, you've got a strategy to sell the HP stack into the data center. It seems like Cisco may have been making more of the public rumblings so far, but I wanted to hear what you had to say about what's going on.
MARK HURD: Well, we just see the networking opportunity in isolation as a big one for our customers. You know our history with ProCurve. We've had a very successful run with ProCurve. We've gained a material amount of share, both in ports and in revenue. We have announced our intent to acquire 3Com, which we think is a set of capabilities, end-to-end, that we think is going to be very impressive.
It's a market with good growth in it -- very high gross margins, which is the history of the prices that the current incumbents in the market charge. And we'll be very active in the market, so we're pretty excited about it.
That's one point. Additionally, we see in the future that what you think of today as a server, a storage device and a networking device, in some instances, can be converged and leveraged. We think that's why it's so important that HP has IP in all three of those areas -- the server environment, the storage environment and the networking environment -- and the combination of those three puts us in a position that really nobody else is in.
KELLEY DAMORE: Clearly there's this battle for the data center. And I think what we see is that our readers are in the middle of it. And I'm wondering what your message is to partners with regards to exclusivity, loyalty and selling HP's product portfolio rather than pieces. What would you say to partners in that regard?
HURD: Well, I think that we have a great channel. We heavily rely on the channel. We look at them as an extension of the HP sales force. Listen, it's always easier when you have a relationship that's quote-unquote exclusive. But I don't think our view is that the world has to be exclusive.
We're very comfortable in a co-opetive environment and have been for a very long time. I think that's one of the assets of dealing with HP. You know, we're used to partnering in all kinds of different environments to the optimal conclusion for a customer. Because at the end of the day, we've got to do things that help customers do things.
We choose to have the channel do a lot of that with us and for us. So I don't see any of that changing. Now we're going to try to go to the partner community, as we always have, and continue to grow our channel base. We've had good growth in the channel every year for the past four or five years. We don't expect that to change. And I think you should expect us to continue to try to convince the channel that there are a lot of advantages to being able to leverage all of our capabilities as opposed to just one.
So we think we've got a pretty compelling proposition for our partners and make no mistake about it, we're probably not just channel-friendly, I think we're channel zealots.
Next: M&A Opportunities?
POETER: Mark, you mentioned servers, storage, networking -- are there any pieces within that portfolio that you feel that HP might need to shore up some more as you go forward with your data center offerings?
HURD: Well, I think there's always opportunities. Listen, we have spent $40 billion over the past four to five years in R&D or M&A. So when you look at what we've done in terms of the development of our portfolio, we feel our set of offers are second to none. Second to none.
You asked the question a little differently, which is, is there anything you could do to enhance it? And the answer is that almost undoubtedly there will always be something we can do. And I won't predict for you whether there will be another set of investments along those lines. But we'll continue to invest, particularly in R&D.
That said, I think when you look at what's come out with our [ProLiant] G6 {server] offer, the engineering work has been superb. I think when you see what's come out through acquisitions, through LeftHand, what's come out with our latest release as we base things on Ibrix, which we also acquired, when you look at what ProCurve's rollout has been, I hope with what you see when the acquisition is finalized with 3Com -- I say 'hope' only in the context of getting it done -- when you see what's coming out in Virtual Connect, and I have the benefit of knowing what's in the pipeline on the servers, storage and networking fronts, I think it's pretty compelling stuff.
So we feel good about our current position. We feel good about the pipeline of innovation coming from the company. Early 2010 has had the strongest pipelines of new product introductions you've seen come out of HP in a long time. We expect that momentum to continue. And I'll never, never predict M&A. It's just ... well, it is what it is.
DAMORE: Just looking at it a little bit on its side, we asked you what you would need to add to your portfolio. What would you suggest VARs add to their portfolio and their skill-set as they evolve?
HURD: Listen, most customers want to effect business outcomes. So the discussion we've had today has been mostly about products offered. My pitch to most of our reseller partners is that when you want to come participate with us on the largest accounts, we know the address of most of those customers, we know who the CIO is, and so forth and so on.
The opportunity is really in that SMB environment, which is a $55 billion market in the United States. And the ability to translate products into solutions and to effect business outcomes is really the most compelling value proposition for a customer. So I think looking at markets either vertically or as solution sets is probably the most advantageous thing.
And I think you have a large part of the reseller community that does that, and we want to play into that. We want to combine our strengths with their strengths to effect an extremely positive business outcome for their customer, for that end-user customer. And I think that end-user customer needs a lot of help. They need all the advantages of a big company, they need all the solutions of a big company, and they lean on our partners and us to do that for them.
Next: The Push Into Services
POETER : Maybe we can follow up with a little talk about another form of evolution, which is HP's ongoing evolution as a services company, and obviously the EDS acquisition being a big part of that. But you know, without getting deep into the financials, I'm looking at your revenue for 2009 and we're talking about getting into the 30 percent neighborhood of it is services. What's that ratio start to look like going forward, do you think? Does it get closer to 40 percent? Fifty percent? And then to follow that, just quickly, what's your advice to channel partners on what their mix of product versus services might be?
HURD: I think we don't really focus on what the mix within the company needs to be. Our view is to push forward into the market. And it's not so much, "Is services growing faster than products?", "Is it growing faster than this or that?" That's not really the way we look at it.
There is a large services market and so therefore we will be active in that market. I think to a degree, the services markets do have some change as you move from the largest customers on the planet to more mid-sized customers.
I'm very cautious when I use the terms "enterprise" and "mid-sized," because they mean so many things to so many people. But for us, I think we'll be active in the services area. We depend, though, very much on our channel partners to deliver services into that large market that I described.
The historical, old EDS, which is now a part of HP Enterprise Services, has historically been very focused on the biggest customers on the planet. But we think with our channel partners, there are many services that we can build that our channel partners can offer from us.
So when we go look at our ability to provide services in the cloud -- that's a term I like to be cautious with -- and you break that down into more fundamental services, like backing up a data center, synchronizing databases remotely, etc., etc., etc. -- we think we can build that capability as a service capability from HP. But we can take it to market through our channel.
And so I want to make sure I'm clear to your readers that our services does not mean that there isn't an opportunity for our channel partners. I think quite the opposite.
POETER: In the sense that they will be providing the services and
HURD: Providing it or offering I'll give you an example. Let's say in one of our data centers we had excess capacity on some piece of infrastructure. And many of our channel partners don't have the capital to do that, they don't have the capital to fill out their own data center, don't have the capital to put unused capacity in their data center.
But the fact is that our channel partner could say to a small company, "Hey! In addition to this one data center you have, would you like the opportunity to back it up? Well, I know how to get access to capacity, and it's HP's capacity. And I will sell that to you and I will help solution that to you."
That's an opportunity for the customer, and for our channel partner, and for HP. And that's what I mean by saying, don't run with the fact that if HP gets big in services that means that's to the exclusion of the channel partner. That's why I say to you, we think about partnering at every turn. And we know we don't have a lock on all the great ideas. And we certainly know that we don't have the opportunity to get to all the buying points in the market.
So we're sort of beyond channel-friendly, which is to my point. And there's an opportunity here that's material.
Next: Venturing Into The Cloud
DAMORE : You touched a little bit on the cloud. And I'm wondering if you could talk a little bit about hype versus reality.
HURD: I think as it relates to opportunities using the cloud, I think it's more important that we break those down into specific services. Again, I gave an example of that a little while ago. Where instead of saying, "Hey, how would you like to participate in the cloud," you say, "How would like me to help you back up your data center? How would you like me to help back up your server farm? How would you like to have some peak minutes available so when you have spikes in your workload, you know where to send those spikes without having to buy all that capacity? How would you like to have a private cloud built for you, etc. etc.?"
There are many different connotations of this thing. And I think the best thing for the channel and the best thing for this industry is for us to break those down into specific discussions so we don't have a discussion about something that we can't get a handle on.
POETER: Here's an interesting one from a recent press conference that you did with Microsoft on
HURD: And just to be clear, whose opinion was it that was an interesting one? You said this was from
POETER: Your opinion
HURD: Oh, my opinion
[Laughter]
POETER: Yeah, I was going to quote back your opinion, because I thought it was an interesting one
HURD: I always love that when someone says, 'Here's an interesting one,' and in fact, it's their question
[Laughter]
POETER: Yeah, right, right -- hey, my question is very interesting, and also, I laugh at my own jokes all the time!
[Laughter]
HURD: And my answers are really very interesting!
[Laughter]
POETER: And this was with Steve Ballmer. And you were talking about virtualization and your projects going forward, and you mentioned at one point that you had had some feedback from channel partners, that they were looking for simpler, easier-to-deploy solutions. And just to play the Devil's Advocate on that, because there's a lot of channel partners out there who are going to think, well, a lot my value add is through customization and breaking down complexity, as opposed to just coming out with a solution that's already been made simple for my customers. What would you say to that?
HURD: I'm a big believer that simple is good. I think simple is good in many dimensions. You know, leadership is not about making things complicated. Great things get done when you can break things into small pieces that are understandable and actionable. And I think the same thing's true in technology.
When you go in and tell somebody, "I have this great solution for you, but it's so complicated that nobody can understand it and/or imagine getting it implemented," I'm not sure if that's a good thing. So I actually believe simplicity of solutions, simplicity of service, simplicity of technology is a big asset.
And I don't mean this in a negative way to anybody, but anybody who tries to over-complicate something to make themselves seem more necessary, probably won't serve themselves well over the long term.
DAMORE: How could
HURD: That sounded negative.
POETER: No, well
HURD: But it is what I believe. I mean this sincerely. Think of it as leadership perspective. If I want to get HP moving in the right direction -- we have over 300,000 people at HP -- and imagine if I got up and said, "We have a strategy. But you know -- it's great strategy -- but it's so complicated that all of you can't understand it. But it's brilliant."
You'd get one answer. But it's going to be a different answer when I say, "Listen, I can break our strategy down from the top of the company, down through every level of management, across every business unit, across every geography, and I can even break it down to what each individual person does."
I'm going to get a different impact and a different set of results. The same thing holds true when you're trying to build an architecture or you're trying to build a solution. So that you can break each thing down -- oh, I need a server here, oh, I need storage here, I need software that connects these here. Anytime you over-architect or make something too hard for people to understand, typically you make it too hard for people to execute.
POETER: And potentially to sell, I would imagine.
HURD: Well, I think execution ... listen, in the end, to your readers and to our resellers, the most important thing we all have is the ability to reference our work. We can do a thing, and we can either do it badly or do it well. And when we do it well, the chances are we'll get to go back to the customer we did it well for and get to do something else for them.
And when we're in an opportunity, another opportunity, the best selling that can get done is to have your prospect call your customer and say, "How did it work out for you?" And the customer says, "They took my problem, they made it simple, they delivered against it, and they thrilled me?"
When you sell, the most important thing is that when I go up to a prospect -- because, look, I can get up and tell you any story you want me to -- in the end, it's about, "Give me evidence, give me confidence." And you don't want to hear it from me. You want to hear it from somebody else.
Next: Hurd On The Channel
DAMORE : How has your opinion of the channel changed since you were first appointed CEO five years ago?
HURD: I had a favorable view of the channel coming in. I would say that I probably didn't appreciate just the sheer breadth of it. Particularly globally. We have 144,000 to 150,000 partners of one type or another. Our industry is $1.7 to $1.8 trillion. We can address a large part of it now with our portfolio.
But the only way we can get to that entire market is with tremendous support from the channel. And so I think that as positive as I was coming in, I appreciate it more now. We've got great relationships in the channel. I think we get great support from our channel partners, just great support.
Now does that mean I'm always saying, "We need more partners!"? No. I don't necessarily think we need more partners. There's room for maybe a few selected partners in a few selected markets, but what we need is to make our existing partners more productive. And so we're really focused on trying to do a better job of segmenting markets where there's opportunity. And helping that partner build a plan with us to exploit that opportunity.
And that means us being more disciplined, not just the partner. Historically, we've basically shown up with a bag of goods and a set of capabilities and said to the partner, you know, 'Good luck to you.' But now we want to make sure that we also say, "Listen, if there's a vertical market, a geographic market, a solution set that you're expert on, then we can team together to go get incremental market opportunity." And we want to incent that kind of behavior.
So my view of the channel is very positive, and has done nothing but get more positive, and to be very blunt, the channel's delivered for us.
DAMORE: Is that the message you're going to be delivering at the partner conference? And then second to that, I think that our readers would love to hear what you think about the economy right now in 2010.
HURD: Sure. Listen, in the partner conference, I'm going to be pushing partners to go get more market opportunity. The U.S. is a market we're putting more resources into. We're putting more salespeople into the U.S. And our sales force -- let's be clear that at HP, we know that whether we take a deal direct or take it through a partner, we're economically neutral.
Because we're economically neutral to it -- in any case, everything just goes through the channel -- so our adding more salespeople is not a threat to the channel, it's an asset to the channel. It creates more demand. Our objective is to create more demand for this brand. And then we're channel neutral as to where it lands. Because you're channel neutral, everything goes through the channel, because they add value. We want partners, obviously as you can imagine, we want partners who have more energy on HP, more focus on HP, and we want to make it easy for the partner to do that.
And back to my message about simple, we're not overcomplicated, we bring a great portfolio of products because of our scale. But scale is a strange friend, right? It can be the great scale of the huge HP portfolio with the tremendous capabilities of HP, tremendous support from the very large-scale sales force with the tremendous brand. Or it can be, you know, it's that big HP with a lot of people in it, you have to talk to a lot of folks to get things done, that kind of thing.
And so the very same fact can be an asset or a liability. Our objective is to make it an asset. We want partners energized, fired up, focused on us, understanding our portfolio, trying to help us get to incremental markets. And that's what we'll be talking about. We want to help them sell more, and let them know that they can see us coming from Palo Alto and we want to sell more too.
Next: Forecasting The Economy
POETER : It seems like a lot of the recovery on tech spending as we come out of this tough, tough year-and-a-half, whatever it's been, has been kind of consumer-driven, and everybody wants to know when are businesses going to start spending again? Have they started spending again? What do you look forward to in the next few months or so?
HURD: You know, I'm not an economist. I read, look at numbers and all that kind of stuff. To me, 2009 was a year of generally weak GDP. You had leaning of inventories. So we went into 2010 with a much leaner inventory as an IT sector in this country than we went into 2009.
We do have some improvement in the economy and that consumer improvement in the economy, the way you worded it, still does have an effect across the economy. I mean consumer spending is still in excess of 60 percent of all GDP in the U.S.
So, I think the economy is better than it was in 2009. We went into 2010 thinking it would be a better year than 2009. That might not sound like the boldest statement to make. I'm not sure that what you see today isn't what you're going to see more of for the rest of 2010. I think the hope that the second half of 2010 is materially better than the beginning of 2010, it's hard to find indicators that say that.
And I think while as much as you may want to hear positive people making statements like that on TV, the numbers tend to say we've had some improvement, but what we have is more of what we've got.
Time will tell, and I think we'll take each quarter at a time. As a global company right now, we'd really like to see ... well, let me leave it at that. Let me leave it with what I said.
POETER: This is a topical question because we've got Meg Whitman and Carly Fiorina running for office, coming out of Silicon Valley, seems to be a trend -- what happens with Mark Hurd in the future? Will we ever see you running for office? Is that something you'd ever do?
HURD: I'm, uh, gainfully employed and fully active and focused on Hewlett-Packard.
[Laughter]
DAMORE: I have one other question -- running the largest IT company in the world, what keeps you up at night?
HURD: So I would tell you this ... and you mean as it relates to business, right?
[Laughter]
DAMORE: Yes, you could tell us otherwise, but yes. For the record.
[Laughter]
HURD: Hmm. I would say that I just feel great about HP. I feel great about how it's positioned. It doesn't mean we don't have an issue with one thing or another, and I'm sure you could point out several. I think when you're in my job, the way I feel about it is that if I didn't get HP to reach its full potential, that'd be disappointing.
So what keeps me up at night is not being able to harness the marvelous capabilities and position of the company, the great people in the company, and get them into the position they deserve and that the whole place needs to be in. And that's what keeps driving me. I think the company's just in a great position.
And I think today, to be honest with you, we're still not as good as we could be in many dimensions. We can be better. And I think almost everybody in the company can give you examples of where we don't do things as well as we should. And you think about how good we are in many dimensions with those issues, you just think about what we could be if we got those things right and it's just exciting.
That's what keeps me up, it's getting that right. And it's just a huge opportunity. And that keeps me up. Because I don't think you'd ever want to drive out of the parking lot the last time, whenever that is, and say, "I just wish I'd done this, this, this, this and this."
When I drove out of the parking lot of my last company, the only other company I've worked for in my career, I was sad. I didn't want to leave. But the one thing I can tell you without any doubt is, I left everything I had on the field. And that I did everything I could to get that company in the absolute best position I could to win. And that's how I feel.