Hurd's successor must show HP can do more than cut costs

OvumFormer HP CEO Mark Hurd’s departure may turn out to be a classic blessing in disguise.
 
Admittedly, his skills in cost control and performance metrics were just what HP needed when he took the reins in 2005. Back then the vendor was still struggling under the weight of its messy integration with Compaq.
 
Once the company’s financial house was in order, Hurd also presided over the company’s rapid expansion into new markets through multiple acquisitions (EDS, 3Com, and more recently Palm).
 
But this has required more rounds of integration and inevitable restructuring; for example, the company announced in June that 9,000 additional positions will be eliminated.
 
As a result, in the past several years the “HP Way” – so called for its longstanding, R&D-driven approach to developing and marketing technology and services – has been more synonymous with cost cutting than anything else.
 
While Wall Street cheers such focus and HP’s financials have been mostly healthy, it’s no way to grow a business in the long term, particularly among enterprise IT customers.
 
It’s true that HP’s drive for ongoing efficiency and multiple acquisitions has allowed HP’s leadership team to fuel its multi-year strategy to be a premier low-cost and strategic provider in enterprise IT (broadly captured for example in HP’s Converged Infrastructure vision), with an emphasis on modernizing data centers, IT management, and streamlined global service delivery.
 
 
But an air of uncertainty has long surrounded whether HP can find long-term success with this strategy, with seemingly constant restructuring and organizational change generating questions from customers about HP’s stability and service delivery capabilities.
 
For some customers, Hurd’s departure will only add to those questions.
 
The HP board of directors seems keenly aware of the opportunity it has to set HP on a new, more innovative and growth-oriented path in the wake of Hurd’s unexpected departure.
 
While CFO Cathie Lesjak takes the CEO position on an interim basis, the search committee will be headed by board member Marc Andreessen, a Silicon Valley pioneer known for his investments in cutting-edge companies and technology.
 
Speculation is building over whether HP is more inclined to select a long-serving internal executive as its next leader to provide a smoother transition post-Hurd, or bring in an external candidate from Apple, EMC, IBM, Dell, or elsewhere to deliver a jolt to the vendor’s long-term business plans.
 
Hopefully Andreessen’s involvement will ensure that HP seizes this chance to position HP for long-term growth while tapping into its heritage and reputation as a Silicon Valley innovator – a reputation that has been diminished over the past few years with the near-constant drumbeat around cost control, acquisitions, integration, and reorganization.
 
 
As the search process commences (and the board has set no timeline for its succession plans), HP’s most important priority will be to reassure enterprise IT customers that any corporate turmoil will not impact HP’s ability to deliver products and services effectively.
 
HP’s many IT partners and alliances, especially Oracle, SAP, and Microsoft, can be particularly helpful in getting out that message to the market, given their many large, joint global customers.
 
A recent string of high-profile contract wins (the US Navy, General Motors) is another sign of customer confidence on which HP can lean.
 
The vendor is already saying it doesn’t expect Hurd’s departure to negatively impact the company’s financial performance this year.
 
Concurrent with Hurd’s resignation HP announced preliminary third-quarter results that were 11% higher year-on-year and raised its full-year revenue outlook.
 
John Madden is a research director at Ovum
 
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