|Innovating The Next Big Thing||June 19, 2013|
• Telecom & Commerce
• Smarter Phones, Devices & Apps
• Enterprise Mobility
• Wireless Web
• Arts & Entertainment
• Tablets & Notebooks
• Safety & Security
• Remembering 9/11
Next Innovator Group
Feedjit Live Web Stats
• Ghost City
Ovum: HP makes headcount cuts to dig its way back to innovation
Jun 1, 2012 – Carter Lusher, John Madden, Tim Jennings
HP, as part of its (expected) disappointing second-quarter earnings announcement, revealed on May 24 that it was planning to lay off 27,000 or about 8% of its workforce by the end of its 2014 fiscal year as part of a massive restructuring. This move represents the most significant component to CEO Meg Whitman’s drive for much-needed efficiencies and savings. What’s more, the vendor says the $3bn or so restructuring savings will be reinvested in R&D and critical product and services areas such as cloud and security.
Restructuring and R&D investment are just the first steps
HP’s restructuring is painful but necessary in order to restore market and customer confidence after the last year two years of turmoil. We’ve been down this road before, of course, and the market remains skeptical about how these operational changes will enable HP’s stability, especially for its enterprise business.
What’s encouraging is HP’s indication that most restructuring savings will be directed toward R&D, a part of HP’s legacy and history that the company has sorely undervalued in the past few years, but which will be a critical component of HP’s recovery in new product and service development. Much of this is predicated on HP’s ability to successfully execute on its restructuring plan and demonstrate the need for more R&D to investors. Wall Street, predictably, reacted positively to the restructuring news, but convincing investors about the value of R&D if earnings continue to lag is another matter altogether.
Some of the factors related to whether to invest in R&D are outside of Whitman’s control. The ability to reinvest will depend on the stability of the revenue stream, and if sales soften or continue to remain flat then Whitman and the HP board will be under pressure from Wall Street to make further cuts, not investments or reinvestments. As a consequence, enterprise and public sector IT executives should be looking for hard proof that the investments are being made during this planned restructuring phase.
With this announcement, we’ve now seen major pieces of Whitman’s restructuring and operations plan. However, the key missing piece is her long-term company vision and strategy, which must soon be revealed to an anxious customer base. Even with this restructuring, the question still remains: just what kind of company does HP want to be next year, three years, five years from now?
Enterprise customers have been debating whether HP will continue to be a strategic supplier for some time now, and until customers hear more about HP’s strategic direction beyond restructuring, the debate will continue. Some will see the layoffs as the first step on a road to recovery, but many more, we think, will worry about the layoffs’ negative impact on service delivery (as during Mark Hurd’s restructuring phase). This kind of restructuring affects all parts of an organization, from customers, to partners, to employee morale, and some customers may simply be unwilling or unable to take a risk on HP as it contends with so much uncertainty.
Can HP effectively leverage Autonomy without Lynch?
As part of its restructuring, HP also announced that Autonomy founder Mike Lynch has left the company. Lynch’s departure from HP seems counter-intuitive in light of the company’s intention to reinvest in R&D following its planned layoffs. Lynch is a technology visionary, and parting company on the basis of poor sales execution in the division indicates that HP is struggling to create a clear vision for how to leverage its very expensive acquisition. Again, Whitman needs to outline the strategy soon.
Since the acquisition, HP has allowed Autonomy to run autonomously (admittedly somewhat at Lynch’s behest), including maintaining a separate R&D function, but this has made it difficult for it to benefit from the company’s core technology within the broader HP portfolio, at a time when it is one of the hottest areas for enterprise investment. Indeed, if Autonomy is itself a core technology then surely it should be at the center of HP’s R&D hub, much as IBM made WebSphere a foundation technology for its software division.
HP would have been better advised to utilize Lynch’s talent across all of its software business, or even in HP Labs or in the company’s broader R&D efforts, rather than to allow him to remain at arm’s length, and subsequently land him with the blame for poor sales execution, though it seems unlikely that the entrepreneurial Lynch would have been content to restrict himself to an R&D role.
HP insists that Autonomy will be critical to its future roadmap, especially cloud computing and information management/analytics. However, IT managers should exercise caution in planning new investments in Autonomy products until HP can provide a clear roadmap for the technology both as a standalone solution, and as part of the wider HP portfolio.
» Send this article to a friend...
» Comments? Tell us what you think...
» More Telecom & Commerce articles...
Commentsblog comments powered by Disqus
Support This Site
• 6/13 Faultline: Vodafone Kabel Deutschland talks confirmed, deal could be dusted in days
• 6/13 Faultline: Comcast sneaks in Homespot revolution as “Neighborhood Hotspots”
• 6/10 Ovum: Analyst view: Google to buy Waze
• 6/10 Ovum: Analyst view: Apple acknowledges the need for user interface refresh and is willing to do something pretty dramatic
• 6/10 Wireless Watch: Small Cell World Summit: industry poised to kickstart volume roll-outs
• 6/10 Wireless Watch: Cisco seeks leading role in wireless via small cells
• 6/6 Ovum: Ovum announces winners of inaugural “BYOX Strategy” awards
• 6/6 Ovum: Analyst view: SFDC acquisition of ExactTarget is expensive, but offers significant product synergies
• 6/6 Faultline: Cloud browsers to gut the set top market – ActiveVideo leading the chase
• 6/6 Faultline: TiVo wins its biggest ever settlement - share price barely nods
• 6/5 Ovum: Ovum warns BYOD is here to stay and urges CIOs to respond with a clear strategy
• 6/4 Ovum: Ovum finds disruptive technologies are driving ITSM vendors to differentiate beyond just ITIL process support
• 5/31 Ovum: Analyst view: Telecom Italia spin off its fixed assets
• 5/30 Ovum: Analyst view: Australia launches national cloud computing strategy
• 5/30 Wireless Watch: Europe loses mobile edge to US, but the debate is already an anachronism
• 5/30 Wireless Watch: Broadcom chooses Wi-Fi and Bluetooth for internet of things
• 5/30 Faultline: Cisco VNI under predicts tablets, WiFi and more or less everything
• 5/30 Faultline: Twitter chases Facebook targeting second screen advertising
• 5/29 Ovum: Ovum reveals South Korea offers emerging IT services outsourcing opportunities
• 5/28 Ovum: ZTE slips by Alcatel-Lucent in global ON market; top two slots now held by Chinese vendors. 100G passes $1bn, but overall market remains sluggish
• 5/23 Ovum: Analyst view: HP’s financial results reminds us that restructuring is not linear
• 5/23 Ovum: Ovum comments: HP’s financial results reminds us that restructuring is not linear
• 5/23 Wireless Watch: New Intel chief puts post-smartphone devices at the heart of his agenda
• 5/23 Wireless Watch: Satellite spectrum under siege from cellular predators
• 5/23 Faultline: TiVo blows away numbers – still ignored by investors
• 5/23 Faultline: Yahoo gambles on social networking to make up for lost time
• 5/22 Ovum: Ovum warns vendor consolidation and cloud services transform HR services but not necessarily complex BPO
• 5/21 Ovum: Analyst View: FTTs bridges wireless and wireline
• 5/21 Ovum: Analyst view: Vodafone’s results are a continuation of the story of the challenges facing Europe’s telcos.
• 5/21 Ovum: Analyst view:NSN and Ericsson make carrier Wi-Fi announcements at CTIA
• 5/20 Ovum: Ovum reveals market leading ITSM solutions in free research webinar
• 5/16 Faultline: Better the devil you know – Vodafone enters broadband tryst with DT
• 5/16 Faultline: ABC goes paid by the back door – uses pay TV authentication for App
• 5/16 Wireless Watch: I/O: no hardware or stunts, as Google reworks its web platforms
• 5/16 Wireless Watch: Roaming and signalling issues threaten VoLTE’s quality
• 5/15 Ovum: Analyst View:The Federal Budget promised to be a Budget like no other and it did not disappoint
• 5/15 Ovum: Ovum announces winners of inaugural “On the Radar” awards
• 5/15 Ovum: Analyst view: Blackberry unveils the Q5
• 5/15 Ovum: Ovum warns command-and-control management is dead at ICT flagship event today – Ovum Industry Congress
• 5/14 Ovum: Ovum breaks new ground in marketing technology and digital marketing analysis with the appointment of Gerry Brown
• 5/10 Ovum: Ovum comments: GB smart meter delay better late than never
• 5/9 Wireless Watch: Microsoft/Nokia alliance at crossroads as both ponder OS futures
• 5/9 Wireless Watch: Apple must rethink far more than the iOS user interface
• 5/9 Faultline: Quantenna gets closer to ST Micro, expect it to get “ascloseasthis”
• 5/9 Faultline: Microsoft volunteers to take Nook, as Barnes and Noble start to breakup
• 5/8 Ovum: Government policy-makers need to create a level playing field for cloud services procurement
• 5/7 Ovum: Analyst View: TPG looks to become Australia’s fourth MNO
• 5/7 Ovum: Analyst view: UK G-Cloud to champion public cloud
Amazon Ads: More Cell Phones