HP Combines Services And Systems Units

Hewlett-Packard's vision for utility computing, which it calls the Adaptive Enterprise, is about helping a company quickly respond to change by better aligning business technology with business processes. HP's fate rests on the success of this strategy, and the systems and services vendor last week made some major managerial and organizational changes in order to better deliver the integrated products and services that are expected to generate 20% revenue growth next year, a goal set by chairman and CEO Carly Fiorina.

HP next year will combine its services and enterprise-systems organizations into a Technology Solutions Group run by Ann Livermore, executive VP of HP Services. Peter Blackmore, executive VP of the Enterprise Systems Group, will manage HP's new Customer Solutions Group, which will be part of the Technology Solutions Group and will sell HP's entire lineup of products and services. Both Livermore and Blackmore will continue to report to Fiorina. As a result, HP will have three groups that issue separate profit-and-loss statements: the Imaging and Printing Group, the Personal Systems Group, and the Technology Solutions Group.

Closer alignment of servers, storage, and services should help HP better focus on its primary strength: delivering business technology that works without a lot of fuss, says Barry Strasnick, CIO of CitiStreet LLC, a joint venture between CitiGroup Inc. and State Street Corp. But HP shouldn't make the mistake of pushing big services contracts. "In the past, the HP Services people would want to create a whole big project and do the project management," he says. "I have my own people to do that."

HP's Enterprise Systems Group, which makes servers and storage systems, faces stiff price competition from Dell and IBM, IDC research VP Jean Bozman says. By merging the systems and services organizations, HP wants to promote the message of many individual systems working together in a single, virtualized computing environment. "The focus is on delivering data services and supporting business processes," she says.

HP's reorganization plans coincided with last week's disclosure of a $50 million contract with the U.S. Treasury Department to implement a server-consolidation project for the Internal Revenue Service using HP ProLiant servers and StorageWorks storage area networks. Server and storage consolidation are generally considered the initial steps in providing IT resources like a utility. HP and implementation partner PlanetGov Inc. will replace about 30 SANs and 4,400 Dell and IBM servers with 3,000 HP servers and 30 storage systems. The IRS is in the midst of a multibillion-dollar overhaul of its systems, which is way behind schedule and 40% over budget, according to the IRS Oversight Board, an independent watchdog created by Congress.HP last week also revealed $1 billion in new outsourcing contracts signed during the first six months of fiscal 2003. HP's fiscal year ended Oct. 31. Customers include Land O'Lakes, Novell, and the U.S. Postal Service.

CompUSA Inc., which runs its SAP applications on 32-bit HP ProLiant servers and data warehouse apps on 64-bit HP Integrity Superdome servers, doesn't expect to see any significant changes as a result of HP's management shuffle. The computer retailer conducts most of its business with HP through a reseller, which is a change from its dealings with Compaq, which supplied systems directly. "We've seen nothing so far that has caused us concern," says Doug Gray, CompUSA's director of SAP and data warehouse operations.

CitiStreet's Strasnick is waiting to see how HP's changes play out but says for now he's pleased with the moves. That doesn't mean the pressure is off HP to deliver; Strasnick says he has high expectations. "If I don't get good support from my hardware vendor, it's a career-threatening move for me."