The HP Way, Albeit Sideways

Anyone authoring a perspective on the topic of Meg Whitman’s appointment as CEO of HP is faced with a dilemma: observe the obvious wins and losses of her career and repeat what has been said hundreds (if not thousands) of times, speculate wildly about what she will mean to HP’s direction, value and viability, or explore an alternative viewpoint at the risk of being mocked by a fickle and less than patient community of analysts and readers hungry for the next corporate misstep.

Gabe Cole, who leads the Telwares IT Transformation Practice, addressed all three angles when he stated “A colleague put it best when he said HP is a tremendously tormented company. Fundamentally, there is conflict between high volume lines that provide short-term financial boosts (such as printers, desktops, notebooks, etc.), and focusing on more valuable enterprise and services plays. Both of the previous CEOs tried to break that cycle and failed as a result of different personal “flaws”…Hurd violated board standards and Apotheker was aloof and failed to build a team. It is safe to say that neither won the favor of the board. This is likely the endgame for HP.”

HP is heavily woven into the computing fabric of leading organizations, and has been driving advances in consumer PC, storage and cloud computing markets for years. Through their announced acquisition of Autonomy, economics aside, we know they directionally understand the services market going forward and the value of a big data play in staying competitive with rivals. This is not a business that will unwind overnight. That said, large enterprises are increasingly risk-averse and looking to source their next-generation network and computing strategies with a primary partner – the public soap opera that is HP over the past several years, along with a 49% drop in stock price, will not bolster enterprise confidence that HP is the partner of choice.

“Meg Whitman and Ray Lane must take decisive action in the first 90 days to shake up the board and management if HP is to survive as an independent company. Incremental smoothing will no longer suffice as HP needs to redefine and focus on its corporate soul which somehow it lost along the way” added Cole.

To that end, communications to both employees and the public has been challenging for HP and has played a major role in the turbulence related to the organization. It’s been a disastrous combination of messaging from leadership to customers and employees in stark contrast to very public actions. Customers are left to discern what the truth is concerning strategic intent, and for employees how it will ultimately affect them personally and professionally. Even Meg Whitman’s first memo to the organization, undoubtedly aimed at creating some sense of reassurance and stability, misfired. The text was riddled with references to “we”, meaning Meg and Executive Chairman Ray Lane. Based on that intonation, there will be questions about who is in charge – and everyone is left to question just how viable the organization will be. In both cases HP erodes what is ultimately most valuable in the open market: trust and credibility.

Despite the public drama and speculation, the announcement of Meg Whitman could prove to be a positive turning point for HP. Whitman has a number of hits under her belt, including growing eBay into a powerhouse organization of over $8B and successfully purchasing PayPal. She brings with her the confidence of Silicon Valley, and the (mandated) support of her Board and Executive Chairman. Her roots in consumer businesses might also be the alternate perspective required to reinvent the companies vision and overhaul lines of business.

Enterprises should not erase HP as a potential supplier, but should apply a heavy dose of “wait and see” for the next few months. HP needs to quickly rebuild its stock price and regain credibility through crisp actions from Whitman, or risk being sold off in parts. If Whitman is not successful, there is no reason for any business to take on all that uncertainty when there are other, perfectly viable partners available.

Telwares mentioned in dark fiber article

From Bill Snyder’s colum:

From feast to famine: Dark fiber gets hard, and expensive, to find

Early in this about-to-close decade, fiber optic cable was going to be the answer to everyone’s bandwidth problems. Before the dot-com bubble burst, “everyone who owned a right of way, from railroads to telcos, got greedy and started laying cable,” says Glenn Ricart, an Internet pioneer who is now CEO of National LambdaRail. Not surprisingly, the result was a glut of dark (this is, unconnected and unlit) fiber that lasted for years.

But prices are soaring as the shortage disappears. And it could affect the connectivity choices open to enterprises.

Dark fiber can provide high-speed connectivity at a low cost. Instead of paying telcos to incrementally adjust the bandwidth on a physical link as needed, dark-fiber customers can simply light up the circuit with inexpensive 100Mbps or 1Gbps termination gear. What’s more, the use of dark fiber means the circuit can be used for other protocols as well, not just IP.

Until this year, prices were generally reasonable, but have doubled in the last 12 months as the inventory of dark fiber shrinks. By contrast, prices for lit fiber have gone up just 10 to 15 percent, says Ricart.

One reason for the big uptick in prices appears to be a surge of buying by Google and perhaps Amazon.com and Microsoft, which will need ever more bandwidth as they expand efforts in cloud computing. “Google has bought an awful lot of dark fiber from people like us,” Mark Lewis, director of service development at Interoute said at an industry conference in November. It’s not hard to see the connection between cloud computing and fiber: If services are located outside the enterprise, there’s a much greater need for connectivity. Cloud computing still plays a relatively small role in enterprise IT, but buying fiber now is an insurance policy against the day when capacity is needed.

Meanwhile, companies holding dark-fiber inventory have taken portions off the market to push prices even higher, Ricart says. That’s a tactic that wouldn’t work if there weren’t an imbalance between supply and demand in the first place.

Ultimately, the market should correct itself, says Michael Voellinger, executive vice president of IT and telecom consultancy Telwares. “The investment opportunity surrounding low-latency capacity solutions in the context of the cloud and bandwidth-intensive applications and content is enormous. The dollars will flow into fiber,” he says.

Voellinger expects the shortage to be short-lived. But it took about nine years for the glut to turn to a drought, so it’s not at all clear how long it will take for the balance to swing the other way.

The shortage is not uniform, notes Ricart. Enterprises in the largest markets can still find the capacity they need, but in second- and third-tier cities, there is a crunch. His advice: “If I were a CIO in a lower-tier market, I would think about locking in connectivity.”

AT&T Call Center Solutions Announcement

Commentary from Sam Bloomfield, Contact Center practice leader at Telwares -

AT&T’s announcement that it will be offering a hosted solution for call center operations is consistent with the trend of moving more telephony and CRM application to the cloud. Like all solutions there are advantages and disadvantages to this approach. It is useful to have this solution if you are willing to surrender some control over some of the basics you were use to having. At the same time it demands reliable and fast connectivity and confidence in the available of ATT resources to make changes that you need, unless you have the access and staff to make those adjustments yourself. Most larger operations will probably be less interested in this service/product because of the control issues involved. Smaller shops could see real benefit to this approach and reduce overhead costs associated with some of the on-premise solutions. Be sure to create a solid business case to prove how this should work. Also understand how changes will be made and how quickly and above all understand the level of service and priority you will be getting form the carrier.

The trend to move more and more applications to a central host is rapidly picking up momentum. Carriers and providers like this approach because it allows them to control the relationship, and provide the outsourced solutions, often attractive to many organizations. If you have a hosted relationship the barriers to changing providers in some ways is higher. You may be less likely to make the switch because you are not as in control of the parameters as you were when it was all premise based. At the same time it could result in more movement because you have less control. You may be willing to find a new full service provider because you are used to having another party manage so much of the technology process, and you are used to fewer IT resources on staff. Carriers also like this approach operationally because they can control upgrades, sell in new services and provide the kind of direction they can control, and create trends that increases customer “stickiness.” Just like netbooks are begin to gain market share of significant size, SaaS is gaining in popularity. No new operation, or one that keeps up with emerging trends can afford to ignore this option. At the same time the decision to go with this approach must be decided, like all good business decision, with full visibility into the pros and cons, expense versus investment, and account management and support services and level of overall service level comfort from the provider.

IBM and Sun

Most industry and financial outlets are reporting that IBM is in discussions concerning a $6.5B acquisition of Sun, which would make this the largest purchase in IBM history – and a clear premium amount on the Sun brand and market capitalization.

Sun was a dot com rock star, but has been forced into cost-cutting mode like so many others in the industry. IBM has maintained its credibility as a steady earner so far – so this news has sent Sun share prices on the rise today. This should be of interest to the CIO community, especially in light of Sun’s focus on open source, and could play into a broader strategy around IBM’s impact in telecom, finance, and cloud computing in the enterprise.

More to follow…