Guild Companies

Having survived the largest high-tech merger in history and dealt with one of the most complex IT infrastructure integration projects ever undertaken, the top brass at Hewlett-Packard earlier this month used the one-year anniversary of the HP acquisition of Compaq as a springboard to launch its strategy for enterprise computing, which the company calls the Adaptive Enterprise.

While many of the products and approaches of the Adaptive Enterprise strategy are familiar, they represent HP's staking a claim in territory mapped out by rival IBM Corp with its On Demand initiative, and to a lesser extent the areas charted by Sun Microsystems Inc and Microsoft Corp in their respective N1 and Dynamic Systems Initiative projects. Carly Fiorina, HP's chairman and CEO, talked about the challenges that businesses and their IT suppliers face, and tried to distinguish HP's strategy from those of its competitors. Many of the themes are now familiar in these adverse economic times, but no less true for the retelling. HP, like its competitors, offers a compelling vision about how to make new and legacy systems more malleable and responsive to the changing needs of businesses with sophisticated IT systems that have virtualized resources and autonomic, self-administering features that together boost the utilization of IT resources and make them easier and less costly to manage.

"We are moving from an era of vertical, standalone islands of technology to business processes that expand horizontally," she explained, going on to say that the company has taken a lesson from Charles Darwin's The Origin of Species to heart in not only trying to create the new HP, but to take the lessons it has learned from the HP-Compaq merger and distill the knowledge it has gained from that painful experience into products and practices that it can sell to customers and against IBM, Sun, and others who have similar visions. Central to the Adaptive Enterprise strategy is the main idea of Darwin's work: "It is not the strongest of the species that survive nor the most intelligent, but the one most responsive to change."

In homage, HP has called the framework supporting the Adaptive Enterprise strategy the Darwin Reference Architecture, and this really outlines how various business processes, applications, and IT infrastructure are woven together with HP people and products as well as those of partners to create what HP thinks is a much more responsive IT infrastructure. "It is not an accident that we are launching the Adaptive Infrastructure today," said Fiorina. "It was a year ago that we launched this HP, and we have achieved what we achieved in twelve months because we used our own people, practices, technology, and methodologies." She then went on to explain the size of the IT consolidation that HP faced. On Day One a year ago, HP had 1,200 IT sites with 21,671 servers and more than 900 Web and infrastructure servers. The company had 215,000 desktop computers and 49,000 other devices on its network (mostly printers), and had to support 228,000 separate mailboxes (because some employees had two or more mailboxes) coping with 26 million internal emails a week and 7 million messages to outside partners and customers a week. "Information technology can be a competitive weapon, and we have used it that way," she said, rattling off a bunch of metrics that showed how IT had helped drive business value post-merger. She said that HP had stripped out $3 billion in costs in nine months, and delivered $1.3 billion in supply chain integration saving in the first nine months after the merger, with another $1 billion coming this year. HP rolled out the most complex implementation of the PeopleSoft 8.0 ERP system in the world in this time, and transaction volumes on HP's Web sites are set to triple by 2004. The IT strategy HP employed on itself reduced the cost of transaction processing by $20 million annually, and the company reduced the number of applications it needed from 7,000 to 5,000. Perhaps most significantly, overall IT costs have come down at HP by 24 percent.

In an obvious jab at Big Blue, Fiorina said that it was time for IT shops to not just settle for "on demand" utility computer, but to "demand more" from their IT partners. She said that while IT cannot be controlled by "geeks" any more, it was equally unpalatable for IT shops to accept the idea that some third party--the unnamed IBM Global Services--should convince them that IT is difficult, requiring "magic binoculars" and "pixie dust" for end users to understand it, and therefore they should hand over control to experts.

HP's chief technology officer, Shane Robison, peeled the onion on the Darwin Reference Architecture, which mapped how different and products and services fit into a more adaptive process for changing business processes and quickly adapting IT infrastructures to support changes. He talked a bit about HP's Utility Data Center virtualization product, which has been installed by HP Labs in its Palo Alto, California and Bristol, England facilities to create a giant data center supporting 400 servers as a testbed for how businesses can implement utility and virtual computing today. HP Services has a number of customers who are using UDC as well, and Peter Blackmore, who heads up HP's Enterprise Systems Group, said that UDC has been a factor in many of the big services contracts that the company had taken down in the past year.

But Ann Livermore, who heads up HP Services, hit the nail on the head about what might make HP's Adaptive Infrastructure unique among the major IT players' virtualization and autonomic computing efforts. "We believe that the only things that can ever get better are the things that can be measured," she said, and then introduced the concept that businesses have to start measuring their agility in how they change business processes and the IT that supports them. She said that according to the two years of research that HP had done to try to quantify and qualify agility--a measure of corporate adaptability to new conditions--the company found that most companies have no idea how to measure how effective they are at dealing with change, and even those that have an intuitive and anecdotal sense of what they are doing still often make the wrong decisions when it comes to coping with or intentionally causing change. Moreover, she said that while IT often gets a bad rap from executives and users who say it is not flexible or responsive enough to change, what HP has found in its surveys of customers is that the business processes, not IT, are what is usually slowing the process of change down. This is why HP Services is going to focus, like IBM, on business process engineering. This is clearly why HP in September 2000 tried to acquire the consulting arm of PricewaterhouseCoopers, an expert in business process engineering, which became a unit of IBM Global Services last year.

Blackmore took the stage after Livermore, and quickly went through the portfolio of infrastructure products that HP can bring to bear. And he stressed something that will make HP's engineers happy, something that Fiorina echoed in her closing statements. "Innovation really matters," he said. "It makes a difference to our customers every day." He said that the Itanium processor developed by Intel and HP would prove to be disruptive to the established RISC architectures that dominate server revenues today, and that with its dominant position in 32-bit Intel servers, HP was well positioned in servers. He also committed to improving HP's position in the market relative to Dell. "Stake in the ground," he declared. "We are going to extend our market share leadership." He also said that the techies in the performance labs had committed to breaking the 700,000 transactions per minute performance barrier with the 64-way Superdome server based on Intel's 1.5 GHz "Madison" Itanium 2 processors, which are due this summer.

But technology is only part of the solution HP will be selling under the Adaptive Enterprise banner. "We don't think this is a people problem," she explained. "We think this is about the smart application of smart people using smart technologies, tools, and methodologies. We will use a lot less people than our competitors."

This is an obvious thorn in IBM's side, and if HP had acquired PwC's consulting business, IBM might be saying the same thing to HP. If HP is proven right in the next few years and body count for projects starts mattering in the marketplace, then not being able to acquire PwC's consulting arm and having to learn to do more with less as a consequence might turn out to be a blessing in disguise for HP, as much as having all those good people at PwC will turn out to be a boon for IBM Global Services.