HP’s New World Order according to Leo Apotheker

The new CEO of Hewlett-Packard, Leo Apotheker, has unveiled his vision of the future in the consumer and enterprise markets. His announcement carried some suspense after interviews in which he said “HP has lost its soul” and added that he will “get rid of cynics” inside HP who try to undercut his mission. Now Leo has defined what his company calls Everybody On, which is described as “seamless, secure, context-aware experiences for a connected world.” He intends that HP will reposition itself in providing a new generation of cloud services to interconnect its software and technology assets. HP of course is no small technology provider, with over $125 billion in revenue and a predominantly legacy and acquired software business worth over $6 billion. I want to provide some analysis of HP’s announcements in the context of what I see as the coming business technology innovations of this decade. My view overlaps with the HP vision. HP is expanding the territory of its business,  focusing less on the enterprise software business of database, middleware and applications and more on the management and security of cloud services and software.

Cloud computing is where Leo’s HP is articulating its mission of bringing together an interconnected market of consumers and the enterprise. HP plans to further the interconnectivity of its computers, servers and printers using the webOS technology it acquired from Palm. This approach is smarter than leaving it to Microsoft or any other provider for a mobile operating system. HP has been expanding its cloud computing efforts in an “open cloud marketplace” that will be accessible from its technologies whether printers and standard computers or new mobile devices including the HP TouchPad tablet and Palm Pre smartphone. The primitives of these services can be found on its latest generation of printers and accessed via the Internet; you also can access a range of services as I have done personally through my HP 8500, which is a pretty good piece of engineering.

HP’s cloud marketplace will access services that HP has been arming itself to build from public, private and hybrid (combined) clouds and its own software, technology and services. HP will need to provide more software assets there to make it attractive for developers who want to build and deploy in its cloud services and marketplace. I expect this will require more acquisitions, as HP is not known for quick development cycles and timely updates of software to meet new markets; it shares these challenges with other very large peers like IBM, Oracle and Microsoft. The wrapper for its cloud computing efforts is where HP has some of its strongest assets, including management and security, and transformation services to migrate or adapt to new cloud-based software services. Another strength is its ability to manage these computing environments in a data center or grid. Also HP is coming to market with the HP CloudSystem, an appliance to build and manage software on a single platform. HP was quick to talk as well about its Cloud Maps to ease integration of software from Microsoft, Oracle, SAP, SAS and other vendors that operate on its servers and software. The Cloud Maps put a brand on what it has been doing for some time to help software operate on its servers, but now the management software is more tightly integrated with the computing and storage aspects of the appliance. HP also sees itself providing a cloud environment for personal and team computing; this could be promising if the service is as easy to use as what our firm has with Egnyte for cloud-based file sharing and servers for secure access to information along with systems backup.

On the mobility side, HP seriously intends to become a major player in the tablet and smartphone markets. Its life-saving acquisition of Palm in 2010 was widely questioned because, having led early on in the PDA market, Palm had struggled to insert itself into the new markets. But HP has been working hard to leverage these assets and their experience for a new generation of tablets called HP TouchPad and a smartphone called HP Pre3. HP has worked to make them secure and enterprise-ready on webOS but integrated into with Microsoft Exchange server and managed for both enterprise and consumer markets. It has done a great job with multitasking of applications, use of Adobe Flash and interconnectivity of the two smartphone and tablet technologies, which I would love to have with my Apple iPhone and iPad. But let’s remember that practically speaking, neither the best technology nor ones that address the gaps of others are what make a market; that is driven by the marketing and ecosystem of applications and developers that already exist. In this case it also requires a consumer mindset, and this is a very difficult market to penetrate with the strengths of Apple, Android, RIM and even Microsoft. I think Leo will have to build a new consumer and marketing team that will approach its task completely differently than HP has done before. Just because you can sell printers and notebooks to consumers does not provide a free ride in the mobile space as Dell and even Microsoft have seen.

With analytics HP has had some of its bumpiest roads. The controversial demise of HP Neoview that I covered in December that has irked many at HP wrecked the company’s reputation in the buyer community for data warehousing and analytics; many customers shipped the technology back and negotiated downward their consulting services bills. Part of the problem was that HP tried to make Neoview support very large volumes of data continuously and also provide privacy and security of the data, which in the end did not work in many customer configurations. According to my sources, Leo was unaware of the significant challenges and change of strategy that he inherited with Neoview, and the company finally announced the shut down of it on January 24. Since last September most of the talented people who knew the analytics and BI market have left the organization. This exodus was due to lack of leadership and commitment, and even Leo’s arrival did not restore their confidence in management. Now HP has a new strategy with the acquisition of Vertica, a company we assessed previously. The sudden acquisition of Vertica was a bit of a surprise and appears to be a back-room deal involving HP board chairman Ray Lane, who as a partner at Kleiner Perkins invested in Vertica. This deal orchestrated by Leo and Ray seems to be a fast maneuver to find a new analytics strategy for HP without a significant investment or a major shift to its portfolio and leadership strategy, which are desperately needed. It was clear that Leo is not getting all the facts, as he boldly claimed that Vertica has “limitless scaling” and “extreme compression” capabilities to support big-data analytics and is representing it as the next generation of business intelligence. Just as it recklessly positioned HP Neoview as able to solve any data problem, HP again is making promises that its technology has not been proven able to keep, in this case to handle the size and depth of very-large-scale data challenges. Vertica is in the classes of columnar technology, which my colleague has explained. Vertica has good technology and some customer adoption, but like Neoview it will play best with specific applications and uses and not across the entire market; it has to be prepared carefully to load and query to work efficiently. If HP believes it can engineer it to be more, it should look back at its last five years of evolving HP Neoview. A bolder step into the analytics and data management markets would have looked like Teradata’s acquisition of Aster Data that my colleague covered; something like that could have provided entry to the enterprise business markets. Or HP might have looked at the commercialization of the Hadoop open source technology for large-scale data through a company such as Cloudera. Of course this is not the only thing challenging HP – it will need integration and analytics tools to compete with IBM, Microsoft, Oracle, SAP and many others including Information Builders. HP sees Vertica as part of platform services in its overall software strategy, but Leo was showing it off in an appliance with what he called full-, half- and quarter-rack packaging. HP clearly is very early in understanding what it is buying with Vertica and not ready to position how it can be used; many organizations that bought and attempted to apply HP Neoview still have bad tastes in their mouths from wasting not only dollars but time, which is a more critical business asset, and are likely to be skeptical of the new approach.

The collaboration and social media aspects of the consumer and enterprise markets include not only the likes of Twitter, Facebook and LinkedIn but also Salesforce Chatter, SuccessFactors CubeTree, Saba SocialLive, Jive Software and many others. HP did not communicate anything substantive in this area. It instead has focused on the need to get content on devices and platforms through digitization from print. HP sees itself driving the workflow of creation, authentication, storage and accessibility of information in a collaborative environment. This could work if it can be accessible across the variety of business mobility technologies beyond HP’s own and made part of the overall computing fabric.

HP has been evolving its work in information management toward what it calls information optimization, which is based on content and records more than data. This I think puts HP at a disadvantage to IBM, Oracle and SAP, especially to IBM’s information governance focus. Despite this HP has begun to present a coherent set of methods and processes to manage the life cycle of information, which could help it play a more strategic role in enterprises. Using a partnering approach to database management systems (except for Vertica), HP will have to find a path for further expansion and interoperability. It also will need to find more progressive ways to access IT data and provide IT analytics that our research found to be great demand. Vendors such as Splunk, which I have assessed and Planview are addressing these issues. Splunk, for example, has been growing by making it simple to access, index, search and present IT data in meaningful metrics and information applications for IT and business.

In its professional services, HP has focused on multiyear IT outsourcing deals or providing private cloud environments for enterprises. The latter is a good place to look for the future as the demand by enterprises for most consulting services has not rebounded since the economic collapses over the last three years. This was also confirmed in our major new business analytics benchmark research  which shows that external consulting resources (7%) and outsourced IT resources (3%) seldom have responsibility to design and deploy analytics.

This is not unexpected as enterprises and CIOs need to control their own destinies and have learned many lessons in recent years about why business units aren’t pleased with their current computing environments. My colleague said it well recently in “With IT Departments, Companies Get What They Deserve” in which he outlines why CIOs and IT need to be more engaged in the success of business. In many cases that means making information ready to help business processes operate more efficiently and applying analytics for making decisions. HP is focusing its communications with CIOs mostly on the cloud and is preparing to meet business needs for cloud-based services. The issue here is that the lines of business adopting public cloud business applications want to onboard and use them in quick implementations that do not require the debate and delays in meeting corporate IT standards and governance. This attitude challenges IT to manage data in applications spread all over, which my colleague describes as clouds raining corporate data. HP does have software to help with information enablement across both enterprise and cloud, as do Informatica, Pervasive, Jitterbit and the new SnapLogic, and can offer consulting services here.

HP has software for application transformation, but it needs more than just application life cycle, virtualization, security and management to help enterprises adapt to cloud computing in a hybrid environment. HP is playing to its strength in management software but also will need to manage the valuable data underlying applications. Wisely, I think, Leo has made it clear that HP will not be acquiring a transactional application company (like SAP, his old company) to gain customers and maintenance dollars, instead focusing on the future computing environment; I believe this is the right approach if HP can fill its gaps.

HP does have a lot to offer in what it calls security intelligence, to help organizations manage incidents, vulnerability and policies to ensure they build a safe, risk-free environment. This will definitely be an opportunity for HP to further its differentiation as it is has assets and an approach superior to those from IBM, Microsoft, Oracle and SAP.

In life-cycle support of its products, both the consumer and enterprise markets have expectations of timely migration that makes technology faster and easier to use. Except for its hardware businesses, HP historically has had slow product release cycles, which has deterred some business organizations from using its software. Of course there are challenges in the complexity of software, but IT’s concern is simpler and faster iterations to its enterprise software. I am not convinced that HP yet understands this enough to actually change its culture and processes in this area.

Leo has been under some serious scrutiny lately with his promoting of a new generation of directors on the HP board. It’s likely that significant change is required as the board hampered some of his predecessor’s growth strategies in favor of cost-reduction efforts. It will require some new leadership there and below to deliver the sort of change that Leo has promised. In particular its software and technology products organizations need to work together like never before and digest new acquisitions without losing the talent that made them worth buying in the first place. Leo has set the bar pretty low for what the industry including Wall Street should expect to ensure he gets some time to make necessary changes. It should help that his predecessor squeezed out the obvious waste in duplication of effort and costs that were required to begin the change.

HP is embarked on a cultural and technological change that is overdue. Leo is going to push the organization to adapt and if necessary eliminate those who do not move fast enough to adjust to the new order. This is healthy but will have to be done while improving employee satisfaction to increase productivity and gain better throughput of its business processes. It won’t be enough to craft a fancy new marketing message around cloud computing; it will take a truly transformative approach that can deliver value to business customers in the short term. HP can do this eventually, but the question is whether it can communicate the roadmap for getting with clarity and substance that will be more convincing than the messages from its other top competitors. For me, it is too early to say. I will revisit this situation in three to four months and see if anything has improved, so stay tuned!


Mark Smith – CEO & EVP Research

SAS Institute: The Multi-Billion Dollar Business Analytics Supplier

The just-concluded SAS Institute analyst summit (Twitter: #SASSB) provided the annual update on the company’s performance, strategy, products and customers. My analysis of last year’s event talked about its continuation of its product roadmap to new customer acquisition and the broadening of its underlying platform, applications and vertical solutions. SAS is no small-time mover and shaker when it comes to the analytics industry; it extends from technology to tools and applications across industries, which adds up to $2.4 billion in revenue. SAS’s growth was worldwide, with Canada and Asia-Pacific delivering the largest percentage revenue growth and Europe, Middle East and Africa representing the largest revenue for the company at more than $1 billion in revenue; U.S. revenue came in slightly lower.

Just as important for this software giant is its success in advancing new sales, which were up 20 percent, a sign that it has been able to reach beyond its core customers that have been leasing SAS for decades. The largest part of SAS’s revenue (42%) comes from the financial services industry, followed by government with 15% and services industries representing 11%. But many do not realize that SAS has been expanding its offerings by making them easier to access via the cloud, an area in which it grew by 34 percent in 2010, contributing significantly to the growth in its core of analytics and fraud. SAS has prided itself for many years on its focus on employees, earning an industry #1 rating as a place to work. But its focus on customers and products has earned it high ratings as well as SAS has invested in improving the usability of its broad portfolio.

In defining its core business strategy for 2011, SAS has set five global priorities: analytics, customer intelligence, data management, risk and fraud. These priorities reflect the areas where SAS found the largest growth in 2010: in the Americas, customer intelligence grew by 229 percent, risk management by 111 percent, fraud by 241 percent, and its focus on DataFlux for Data Management grew globally by 29 percent. All of these are areas of comfort for SAS, areas where it has market growth and deep competencies. Speaking to the analyst summit about his company’s technology strategy, CTO Keith Collins outlined focuses on high performance computing, process automation, business visualization, data management and software as a service. All of these are unquestionably important; I hope that SAS also investigates the value of introducing new collaborative methods for person-to-person and person-to-group interactions of the kind we have seen from the likes of Salesforce.com with Chatter and SuccessFactors with CubeTree. All systems used for business should be able to support collaborative interactions that can draw on its workforce’s knowledge and experience to maximize value.

SAS is continuing to develop the framework of its core of business analytics on which it has been working for 30 years. It stretches across data mining, forecasting, modeling, scoring and simulations all the way to advancements in supporting text and sentiment analysis. SAS also has gotten a lot better in discussing the business use of its algorithms and how they can be operationalized into activities and process. This analytics core is the foundation of its business; on it rests the layers of integration with information and data architectures across an enterprise.

SAS has invested significant time in making its analytics more accessible to stand as an alternative to other data-centric computing technologies like Teradata and new players like Aster Data which was just acquired by Teradata, Netezza which was acquired by IBM and Greenplum, acquired by EMC. SAS is betting these investments in high performance computing will make its analytics part of a larger future grid computing strategy in IT; it believes it will address inefficiencies in the new Hadoop and large scale data technologies as well as take advantage of massively parallel processing data technologies.  SAS can abandon one partnership, which aimed to integrate its technology into the now-shut-down HP Neoview; now, however, HP has acquired Vertica to increase its columnar capabilities as my colleague has noted. SAS is not about to allow itself to be excluded from capitalizing on the broader demand for information management; in this regard it has continued its efforts with DataFlux, which it wholly owns. Last year I did a review of its direction. In a surprise move DataFlux also acquired Baseline Consulting to get more management and technology consulting depth to help it scale its ability to help organizations transform their data and information strategies across business and IT. It also now brings deeper value to its data integration, data quality and master data management portfolio with new technologies for federated data access and complex event processing (CEP) that compete against IBM, Informatica, Oracle and SAP. I highlighted the importance of CEP and what we call Operational Intelligence, which is  well-defined in Wikipedia; it’s good to see SAS understanding this as a competitive necessity and so addressing it as part of its portfolio. But I’m not sure SAS understands yet the importance of interconnecting to existing and newly implemented event streams in the enterprise.

SAS readily admits it should be a larger player in the business of business intelligence (BI), but its BI portfolio is still a good part of its overall revenue, estimated at about 10 percent. In response to some pointed questions about its commitment to BI, SAS provided more detail on its efforts. SAS is busy rewriting much of its BI portfolio, using its 350 developers to more thoroughly embrace the mobile technology revolution being driven by smartphones and tablets. As part of its overall strategy, SAS has announced a strategic partnership with MeLLmo and the Roambi technology. Demonstrating the integration of SAS Enterprise BI Server and Roambi ES3 technology already is helping existing customers get mobile-ready for Apple iPad and iPhone devices. Our benchmark research into business intelligence and information applications found a high level of demand by business, but also found IT not yet as optimistic or engaged in enabling the use of mobile technologies. Even our pending benchmark research in business analytics across thousands of organizations finds new demand across specific line-of-business areas. SAS does get overlooked for business intelligence projects quite often and for a number of reasons that are more related to marketing and sales to the target audience of BI and line-of-business analysts than to their product not having sufficient capabilities. It appears that SAS in 2011 will have a series of new releases to broaden the scope of BI with advancements in discovery and visualization, search, mobility and integration with Microsoft Office. This will be essential to compete against the usual suspects like IBM, MicroStrategy, Oracle, QlikView, SAP and even open sourced-based Actuate, Jaspersoft and Pentaho, all of which in the last year have released major new versions of their platforms and tools.

Where SAS has made its presence known is in the office of marketing and related areas, helping them succeed in management and specific operational activities including campaign management and a range of customer analytics from gaining predictive insights on future outcomes to understanding customer behavior at a granular level. SAS has emphasized its focus on resource management, bolstered when it purchased Veridiem many years back and now augmented by the recently announced the acquisition of Assetlink to further deepen its presence in marketing. My colleague recently assessed SAS Customer Intelligence and the portfolio that is gaining traction with new deployments across industries. SAS has also expanded its social media analytics offering to support monitoring deeper sentiment and relationship analysis . SAS has for many years focused on improving the role of technology in marketing, an area that has also been seen as important by the likes of IBM, which acquired Unica and Coremetrics, and recently Teradata, which acquired Aprimo. Our benchmark research into customer analytics and marketing analytics show significant room for improvement, potential that will continue to provide SAS room for great customer and revenue growth. SAS is working hard to unify its suite of applications, seeking to ensure consistency of user interfaces and then deliver support for the mobile needs of marketing organizations. All of these activities are heating up what looks like to be a battle for the CMO’s attention and spend – a battle that will require fluency in talking marketing-speak to be successful.

SAS has invested more deeply into four key industries: banking, insurance, retail and government. I will not get into the details of the significant growth of the offerings that address risk and fraud for these industries and healthcare, as they require more in-depth analysis, but this clearly is where the business analytics foundation plays to its strength in providing suites of applications. One of the interesting aspects of the analyst summit was what was missing as part of SAS’s communications about strategic directions. SAS has invested into many areas including finance, human resources, supply chain, sustainability, IT and into areas of performance management. All of these areas have potential and were highlighted last year, but SAS’s efforts in these areas remain mostly unknown by the specific line-of-business buyers; unless and until SAS invests further into the marketing and sales it probably will not find much new growth compared to previous years. This should be something that concerns it, as have a growing base of customers focused on solving their enterprise problems helps drive improvement and refinements to its business focus. I also have not seen SAS invest yet into area sales and customer service or contact centers. SAS has alluded to adding support for contact center operations but we’ll have to see how that plays out in regards to my colleague’s research areas of agent performance management and customer experience management. Also, I pointed out last year and still believe that SAS will need to invest into speech analytics to gain insight to the true voice of the customer that can be found in customer interactions in contact centers.

From a market perspective SAS has business analytics competencies in industries where I do not see that IBM and SAP have deepened their efforts. On the other hand, SAS is not as strong in healthcare, retail, life sciences, energy and manufacturing. I am sure this will continue to change as the market heats up. I also am not clear where Oracle is at since it has not articulated a portfolio approach to business analytics across industries and lines of business beyond IT and its own application efforts. Also, I need to make sure not to miss the dozens of dedicated line-of-business analytic and performance management application providers that are growing rapidly in areas like sales, contact center and talent management.

SAS has come a long way since IBM donated a mainframe to a university in North Carolina to help advance the statistical programming movement in 1966, back when Tony Barr was part of the origins of the statistical analysis software. Tony and Jim Goodknight, John Sall and Jane Helwig started SAS Institute in 1976. In now reaching its 35th anniversary, SAS Institute has helped advance the science of analytics in so many ways that will never be measured. Now SAS Institute will need to examine if it can expand beyond its comfort level and areas of growth it has outlined to areas where it has new growth potential. If you have not considered SAS for technology and applications in a range of business analytics, look again; there are many great business-friendly offerings that can provide great value. SAS is transforming and simplifying its efforts, bringing its offerings into the cloud, which is part of the reason it has been able to grow without having to increase its consulting services organization. SAS has also opened up and worked very closely with consulting services firms that can help use its technology to transform management and business processes. The only caution in considering SAS is to be aware of the areas where it has not yet upped its investment. But it is worth watching it attempt to deliver on a mission of business analytics for every line of business and industry.

SAS appears to be in revenue and product portfolio the largest supplier of business analytics technology and products, and will continue to grow as businesses invest into the information and analytics that help them not just optimize but perform at the expected level.


Mark Smith – CEO & EVP Research