HP CEO Mark Hurd: Never Enough

Hurd is holding court in HP's simple but comfortably appointed boardroom at the company's Palo Alto, Calif., headquarters on a sunny day in mid-March. The boardroom's doors open out to a terraced garden on the second floor of the building. A light breeze wafting in across the greenery offers some relief from the false spring heat that cooks the parking lot asphalt just a few yards away.

HP has become the largest IT company in the world in terms of revenue since Hurd took over as CEO in March 2005, capturing the top spot on the strength of high-profile acquisitions like Mercury Interactive in 2006 and EDS in 2008, while doubling down on its reseller channel engagements with its increasingly muscular Solution Partners Organization (SPO).

Predictably, people want to hear what Hurd has to say on any number of big-picture subjects. He's generally wary about obliging them.

"I'm not an economist," Hurd said, when asked to assess the strength of the economic recovery following perhaps the deepest global recession since the 1930s. "I read, I look at numbers and all that kind of stuff," he allowed, seemingly puzzled as to why anybody would care about his opinion of macroeconomic conditions.

Hurd is no celebrity CEO. He performs ably when keynoting a major public event, but only does so rarely. He's unlikely to ever make bold predictions about a rival's product, as Microsoft CEO Steve Ballmer famously did when he laughed off the chances for the iPhone's success. Even on HP's quarterly earnings calls, Hurd steers well clear of big-picture pronouncements of the kind recently made by Intel CEO Paul Otellini, who declared during an April chat with financial analysts that the IT industry "has nearly fully recovered."

"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," Hurd said guardedly. His forward-looking outlook is as cautious as it gets.

"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 that 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 [for the second half of 2010] is more of what we've got."

There's not much material there for breathless headlines, but Hurd just doesn't seem interested in talking about factors he can't directly control. The overall size of the market for high-tech products and services is a distraction--it's only when the talk turns to HP's present and future share of specific segments within that market that Hurd digs in his heels. It All Starts With The Channel

"We're not just channel friendly. We're channel zealots," Hurd said to emphasize a point about HP's best path toward a greater share of several market segments. He sees "material opportunities" for HP to gain share in IT services, in sales to small businesses and in data center infrastructure.

To seize those opportunities, HP will need its reseller partners on board.

"We heavily rely on the channel. We look at them as an extension of the HP sales force," he said. These aren't mere words spun to impress a channel audience. Hurd owns this story in earnest.

The HP chief spends upward of 60 percent of the year on the road with his SPO lieutenants, meeting with HP's PartnerOne VARs and their customers as part of the computing giant's Executive Connections program. Those roundtable meetings take place as many as 50 times a year in North America and beyond.

It's an effort that has engendered fierce loyalty to HP among many reseller partners.

"I've probably met Mark Hurd more times in the last three or four years than all of the CEOs of our other vendors combined," said Simon Palmer, president of Tustin, Calif.-based STA, one of HP's fastest-growing solution provider partners in the midmarket segment.

"There's no other CEO of any company that size that's even close. He's such a down-to-earth guy. He presents the HP story in very simple-to-understand terms," Palmer said.

Hurd was scheduled to sit on an Executive Connections roundtable in mid-April with Palmer and CIOs from STA's main customers. Another HP partner, AdvizeX Technologies, had just held a similar roundtable with Hurd and other HP executives when Mark Sarazin, executive vice president of the Independence, Ohio-based solution provider, took time to sing Hurd's praises.

"He spent two-and-a-half hours with our customers. He talked in terms they could relate with, about his own relationship with HP IT. He talked about server sprawl and data sprawl," said Sarazin, whose company has partnered with HP for 25 years and holds its highest partner designation, Preferred Elite.

"He knocked the ball out of the park with our 25-plus CIOs who were in the room. One said it was the best event he'd been to in his career."

Hurd seems to see no limits to how HP's partner channel can play a role in any number of HP's business-facing portfolios. Naturally, he mentions the channel's part in HP's ongoing effort to grow its share of client PC and entry-level server sales into the SMB segment--"a $55 billion market in the United States," according to Hurd.

HP opened a new sales operation in Rio Rancho, N.M., in January called the "SMB Exchange." The exchange combines a call center with inside sales and channel sales teams--the most visible part of HP's effort to carve out SMB market share from "Dell, Cisco and Lexmark and anyone else out there," according to John Hood, the HP vice president running the show in Rio Rancho.

Moving On Up

Of course, SMB engagements traditionally have been the channel's bread and butter. But Hurd says there could be just as many opportunities for partners in segments that have been tougher for VARs to crack. Hurd concedes that the giant Fortune 500-level IT service accounts that HP acquired with EDS--"the biggest customers on the planet"--will likely always be direct engagements for HP. But that doesn't mean HP partners won't be able to gain from that HP Services business, he said. For example, HP partners might want to sell excess data center capacity that HP generates through its large enterprise accounts to their own, smaller customers.

"The fact is that our channel partner could say to a small company, 'Hey, in addition to this one data center that 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. So don't run with the fact that if HP gets big in services that means that it's to the exclusion of the channel partner. 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."

If Hurd's pitch for data center backup sounds a lot like the framework for a cloud computing offering, that's because it is one, he said. But cloud computing is a term that the HP CEO says he uses "cautiously." It lacks specificity, Hurd said.

"I think it's important that we break [cloud computing] down into specific services," he elaborated. "Where instead of saying, 'Hey, how would you like to participate in the cloud?' you say, 'How would you 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.?' "

Hurd and HP are also taking the channel to war with them in a campaign to win new business with some of the fastest-growing midmarket companies in the U.S. Since January, select partners have been participating in an account planning and mapping strategy that teams them with HP sales reps and its top executive team to go after 9,000 fast-growing midmarket accounts.

The stakes are high. HP's goal with the program is to grow its midmarket business at least two times the market growth rate.

The Emerging Growth Accounts program, spearheaded by Kevin Hooper, an HP vice president for enterprise business sales, leverages the full array of data center products in HP's Enterprise Server, Storage and Networking (ESSN) business unit. As with the SMB Exchange, there's no mistaking the companies being targeted by EGA.

"HP's EGA program under Kevin Hooper is squarely channel-focused, whereas other vendors are taking away business from their partners," said AdvizeX Technologies' Sarazin. And make no mistake, he added, the program is squarely aimed at HP's main competitors.

"We know who we're going after. There's a Dell attack program, a Sun attack program, an IBM attack program," Sarazin said.

What about a Cisco attack program? "Yes, that too," Sarazin answered.

The Battle For The Data Center

The general public may be blissfully unaware of it, but there is a battle brewing behind the scenes, deep in the heart of the data center back end that makes it possible for them to have things like e-mail and online banking. It's a battle whose outcome could have great consequence for the technology industry as a whole.

This is Mark Hurd's territory.

In recent years, perhaps accelerated by the recession, a series of consolidating moves by giant IT companies has made it possible for a handful of vendors to begin offering nearly complete end-to-end data center solutions. This small stable of highly consolidated players now includes IBM, Dell, Oracle following its Sun acquisition, Cisco and, of course, HP.

Of those companies, HP and Cisco have made the boldest moves toward making a play for the entirety of the data center's fabric--computer servers, storage and networking. HP calls its end-to-end architecture for the data center Converged Infrastructure and Cisco calls its platform Unified Computing.

HP recently completed its acquisition of networking hardware manufacturer 3Com to bolster its existing ProCurve networking portfolio. Cisco, the dominant player in networking, last year launched its own line of servers for the first time and has allied itself with EMC and VMware.

The moves have vaulted the growing HP-Cisco feud into the spotlight. So far, Cisco has done most of the public saber-rattling--allowing HP's system integrator partner status to expire and cutting off HP's access to the Cisco product road map.

Hurd stays artfully above the fray even as he makes it clear that the 3Com acquisition places longtime networking market-share leader Cisco squarely in HP's sights.

"We've had a very successful run with ProCurve," Hurd said, speaking a few weeks before the 3Com deal is closed. "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 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."

The "current incumbents in the market" is as close as Hurd will come to identifying Cisco as a target. He downplays concerns that HP partners are being leaned on too heavily to dump Cisco in favor of ProCurve.

David Donatelli, general manager of HP's ESSN unit, reiterated that message during an April 19 press conference discussing the 3Com integration, saying that "there will be no pressure exerted" on HP partners to pick sides, "other than us offering great products".

"I don't think our view is that the world has to be exclusive," Hurd said. "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. 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."

Nevertheless, partners of the two IT giants are starting to pick sides.

"We have recently made a strategic decision to go to market with HP networking and not Cisco," said Sarazin.

Answering The Critics

HP has some of the most dedicated channel partners in the IT industry. Partners like Denali Advanced Integration, a Redmond, Wash.-based solution provider that is a "loyal HP foot soldier," according to John Convery, executive vice president of vendor relations and marketing.

"We set all-time records for sales with HP in our first quarter," Convery said. "Our pipeline has never been more robust. This is because of the team effort from all the HP support team starting at the top with Mark Hurd."

But HP has its critics in the channel as well. For every AdvizeX Technologies that's ready to decouple from Cisco, there may be several partners who want to keep their options open. One solution provider who asked not to be named said the pressure from HP and Cisco to pick sides was "reaching a fever pitch."

There are also concerns in the industry that initiatives like HP's Converged Infrastructure and Cisco's Unified Computing could lead to a new siloing of the data center and vendor lock-in. That development could come at the expense of standards-based interoperability between different vendors' hardware and software.

"I suspect that there will still be interoperability at a low level. But clearly, if customers want their higher-level functions to work across the enterprise, they'll have to take sides, too," said Roger Kay, principal analyst for Endpoint Technologies Associates.

Hurd makes the case that such concerns should be outweighed by the advantages inherent in having a solution set for the data center that is simple to implement.

"I'm a big believer that simple is good," he said, speaking as much about his core business philosophy as HP's ambitions for the data center. "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 that simplicity of solutions, simplicity of service, simplicity of technology is a big asset."

Meanwhile, smaller HP partners have at times run into trouble trying to get answers from Fortress HP. In mid-2009, the company issued a mandate to channel partners that they pay $120 to take an anti-bribery training course. Many smaller partners were miffed at the demand, worried less about the relatively small sum of money than the way the program was communicated to them.

Add in the recent news that HP's Moscow offices were raided by Russian authorities as part of a joint Russian and German bribery investigation, and the taste in some partners' mouths can start getting pretty bitter.

Hurd says he is aware of the line HP walks as such an enormous organization. He calls HP's scale "a strange friend." On the one hand, HP's size means it can offer a tremendous portfolio of products and services with support from a massive sales force. But it can also mean that it's difficult for partners and customers to navigate through multiple organizational layers to get things done.

"The very same fact can be an asset or a liability. Our objective is to make it an asset," he said.

Given Hurd's success at righting the HP ship following several down years, it can be easy to forget he had no background in such a giant organization prior to taking the reins. He spent 25 years at NCR, a manufacturer of computer kiosks, POS terminals, ATMs and other business products. As CEO of NCR in his final two years, he grew yearly revenue and profits to new heights--but those figures are still dwarfed by the money HP generates in a single quarter.

There is a sense with Hurd that he is relentlessly trying to make HP leaner and meaner, to make it operate with the nimbleness and energy of a much smaller company. Since taking over, he hasn't been shy about laying people off. He's been equally ruthless about consolidating HP's own IT infrastructure, reducing the number of data centers from 85 down to six.

Hurd's methods haven't pleased everybody at HP. In a recent interview with Forbes, he admitted, "Not everybody is comfortable with being pushed." Few would argue, though, that Hurd doesn't push himself the hardest of all.

As he strides purposefully into HP's boardroom on this early spring day, he spends the bare minimum of time on introductory handshakes before settling in for business--"What can I do for you now?" When the meeting is over, he's just as quick to his feet, ready to charge down the corridor toward the next piece of HP business that demands his attention.

Hurd is driven at HP, he says, because he doesn't 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 I did everything I could to get that company in the absolute best position I could to win. And that's how I feel."