HP reorganises to take on IBM

Larry Ellison, Oracle’s founder and CEO, famously used to surprise his senior colleagues by publicly announcing products and initiatives before they were off the drawing board, a controversial habit that won him both praise (for dynamism) and criticism (for lots of reasons).

Carly Fiorina, the head of Hewlett-Packard (HP), appears to have adopted a similar management style. On 9 December 2003, during an analyst briefing in New York, she let slip tantalising details of a major reorganisation of her company, in which servers, storage devices, middleware, management software and IT services will be grouped together in a single business unit and sold to customers as complete ‘solutions’ – just as IBM does, in fact.

But pressed to disclose more information, Fiorina retreated. “When we’re ready to make organisational announcements, we’ll make them,” she barked.

Twenty-four hours later, amid what seemed to observers a frantic bout of fire fighting, she did make them. A memo signed by the CEO and outlining the reorganisation in some detail was circulated among HP employees. Sources said it was the first that even middle-ranking executives had heard of the move.

What Fiorina wrote in that memo could go down as one of the most significant decisions in her event-filled, four-year career at HP. “During the next few months, we will be taking the next, logical steps toward our goal of becoming the leading technology company in the world,” she claimed, modestly.

The most important of the various changes will see the creation of the Customer Solutions Group, to be led by the current head of the enterprise systems group, Peter Blackmore. The unit, Fiorina wrote, “will sell the entire HP portfolio of products and services.”

The idea for the reorganisation came out of a series of meetings with HP’s recently established enterprise systems ‘task force’. Happy (at last) with the progress that has been made in integrating Compaq’s products and employees, HP managers now said it was time to train their sights on a new target: IBM’s customers, especially those beginning to explore so-called utility computing.

Not that HP will acknowledge this. “I know it is popular these days to describe HP as stuck between IBM and Dell,” Fiorina told analysts at the December briefing. “It is particularly popular for our competitors, IBM and Dell, to say we are stuck between the two. But the facts don’t support the thesis.”

She listed the IT sectors where HP is ranked either first or second, including Unix servers, desktop computers, printers and external storage devices. HP stood out from Dell, which was a “low-tech, low-cost” provider, and IBM, which was a “high-tech, high-cost” provider, she said. No mention was made of Sun.

Insiders at HP say that there is a new mood at the company, and that, after a troubled and introspective period, the market share figures and the latest impressive financial results show the company is now on that attack again.

But before Fiorina’s reputation is made, analysts will want to make sure it all takes. Some rivals – Sun and EDS among them – might be struggling, but IBM is looking strong. And while Fiorina was spilling out her company’s re-organisation, IBM too, was carefully leaking details of its own re-organisation. Its plan? To integrate more, to focus on vertical markets, to get closer to the customer. The stage is set.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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