Meg Whitman doesn't shy away from a challenge. She led eBay from tiny startup to household name, ran for governor of California and, nearly five years ago, took the helm at Hewlett Packard and stabilized an organization stumbling badly from a variety of very public missteps. Having engineered the split of the Silicon Valley icon into consumer tech (HP, Inc.) and corporate-focused Hewlett Packard Enterprise, Whitman is now HPE's Chief Executive Officer.
The IT market is undergoing fundamental and rapid change owing to cloud, mobile and other powerful drivers. The competitive landscape in which this $50 billion startup plays is also shifting dramatically, with a slew of emerging players and the prospect of the largest-ever tech merger of Dell and EMC. No sweat, right?
In this installment of the IDG CEO Interview Series, we asked Whitman to talk directly to IT leaders about what the company split means for them as customers, and how HP Enterprise's new innovation agenda will help them transition to private and hybrid cloud. Whitman spoke with Chief Content Officer John Gallant about why HPE is better positioned than Dell/EMC to drive customer success, and about the company's strategy for hyper-converged infrastructure -- HPE's so-called Composable Infrastructure. She also shared insights on big data, cognitive computing, networking, high-performance computing and other critical growth areas for the company. Whitman discussed the challenges ahead and how she'd like perceptions of the company to change.
I really want to focus on what your strategy, as well as some of your recent moves, mean for our readers, who are senior IT leaders. If I'm a CIO or another top IT executive who has considered HP a strategic partner over the years, how exactly does this split benefit my organization?
First, I would say that the market is moving at lightning speed. I'm sure your audience says this to you every day. I've been in the IT industry for a long time. I've never seen it move this fast. And, in fact, part of the reason for the split was that we had to get smaller to go faster.
What they will find, I believe, is a stronger, more agile, more innovative company that is better positioned to help them transform their IT infrastructure. Virtually every customer I talk to has an aging, siloed, relatively high cost and not as flexible an infrastructure as they would like. And they're going to have to get to a new place with better security, using big data, enabling a mobile generation of users. Most people, not everyone, but most customers need help thinking through that and actually getting it done.
We hear terms like agile and nimble a lot. Can you give our readers some specific examples of what that means for them? Where is this agility actually showing up in terms of new investment or bringing things to market more quickly?
It turns out these two businesses -- both HP, Inc. as well as Hewlett-Packard Enterprise -- are two different businesses. Right? The PC and printer business is a scale [business]. We sell six PCs a second at HP, Inc.
The Hewlett-Packard Enterprise business is a solutions business. And we are now doubling down on innovation and R&D. We have introduced probably the fastest and most important innovation agenda that we have had -- at least since I've been here, for sure, and maybe in the last decade. A lot of long-time HP'ers tell me this is the best product lineup we've had in a decade. It is more focused.
[According to data provided by an HPE spokesman, R&D increased both in absolute terms and as a percentage of revenue over the past three years. R&D grew from $1.95 billion and 3.4% of revenue in fiscal year 2013 to $2.33 billion and 4.5% of revenue in FY2015.]
I'll just tell you personally, I went from running seven businesses to basically running four. And I can tell you I go deeper on each customer, I go deeper on the technology roadmap over the next three years and I work a lot more closely with our business units because I have more time. And that shows up, I believe, in results. We've strengthened our go-to-market and I'd be happy to go through some of the products that we've introduced in the last year if that would be of interest.
I definitely want to go into some of those key areas that you've mentioned. When you talk specifically about R&D and doubling down, can you put some numbers around that? What exactly would people see there?
Well, first of all, they would see research and development as an increasing percentage of sales over the last 4-1/2 years, even as we were cutting costs pretty dramatically. We expect that trend to continue with Hewlett-Packard Enterprise. When you break apart the two businesses, we actually spend a higher percentage of sales on R&D at Hewlett-Packard Enterprise than we did at HP, Inc. because, obviously, the PC business doesn't have a big R&D spend and it's a huge business. I think you will see quite a different picture of our R&D spend and we're going to continue to increase that spend.
When you talk about that innovation agenda, what tops that innovation agenda? What should people know about that?
Well, it really focuses around the four transformation areas that we outlined late last year. The strategy for Hewlett-Packard Enterprise is in many ways the same. We want to help people transition to what we call the new style of IT and we're organizing ourselves around four transformation areas that customers basically told us were their biggest pain points.
I'll recap briefly for you. How do we help IT leaders transform to a hybrid [cloud] infrastructure? How do you decide what apps you want locked down in your data center and touched only by your employees? What are you willing to have in an on-prem private cloud, a virtual private cloud and managed by the cloud and in the public cloud? And then how do you orchestrate all of that for the best asset utilization, the most flexibility and the lowest cost?
The second area, of course, is how do you secure your digital assets? We have both a services practice and a software practice there.
Then, how do you empower a data-driven organization? And we have a slightly different take on this because, remember, we have a very big high-performance compute business. We're practically the last man standing in high-performance computing -- only us, Cray and SGI. As the data multiplies, someone has to crunch that data and so we're really focused on the high-performance compute market. We have products like Vertica and IDOL that help gain insights from all that data.
And, finally, empowering a mobile and generationally different workforce. I don't know about your company, but our 50-somethings have a very different point of view on what they want at work than our 20-somethings. And that was of course why we bought Aruba, for great wired, wireless, LAN capability at the campus, branch and edge.
That investment really seems to be paying off.
It was such a great acquisition for us. It was really just like 3PAR, just like 3Com, it was complementary technology that leveraged our go-to-market, and frankly gave us legitimacy in the switch market. Obviously now everyone understands that we're committed to networking and a great alternative to Cisco in many, many instances.
Meg, I want to get into some of those specific product areas in a moment, but I want to explore more of the context here. Let's say I'm a customer that's committed to HP. If I'm concerned about the company no longer being the one-stop shop that it once was, or I'm worried about losing long-time contacts at the company or changes with my service and support, what are you telling customers like me?
Our TS [Technology Services] organization -- which is break/fix -- used to be one organization. But 4-1/2 years ago we actually split TS to support printing and PCs, and then the other half to support our server/storage/networking/cloud initiative. What we found was the skills to service printers and PCs are actually quite different than the skills to service Superdome Integrity X servers running SQL. So that has not been a big change for customers. If they bought our PCs and printers they got one set of TS execs and workforce, and if they bought our data center products they had another.
When we went through the separation, we actually had two separate contracts with customers because we had to invoice as two separate companies, they had to pay two separate companies. So to do that we went customer by customer -- by the way, value added reseller by value added reseller, of which we have 150,000 -- to get that technology change made there.
Then, by the way, most folks had at least two representatives calling on them. They had a data center person and a printer and PC business. Our global accounts had one person, and the global accounts will still run interference. If you're on the HPE side, they'll run interference for HP, Inc.
I have to say that customers have adapted to this beautifully. I think I've had one customer call me and say, "Hey, I wish I could still have my AGM [account general manager] in charge of all of HP." And I said, "Well great, you can. Don't worry about it, we'll do some one-offs for you."
But the truth is the people making the printer and PC decisions are almost entirely different than the executives that are making the data center decisions. So it's been a really seamless separation of these two companies. Customers got it. There's an expression in politics: When you're explaining, you're losing. And we didn't have to do much explaining on this, honestly.