Inside HP's Building 20 at the company's Palo Alto campus in the heart of Silicon Valley, there is a photo of company founders Bill Hewlett and Dave Packard. It's not the shot of two young entrepreneurs working out of the legendary garage where they started the company in 1939. It is a photo of them later in life as elder statesmen of a technology giant. With all of the cultural changes that HP has undergone, it is remarkable that the photo still hangs there.
More From CRN's Apotheker Coverage
It is an image that new HP President and CEO Leo Apotheker must find inspirational given his drive to restore what he has called HP's "soul." In an exclusive interview with CRN earlier this month, we asked him what he hopes his legacy will be at HP. His answer: "I really have the desire to make sure that HP is the world's best company. As I said to the senior leadership team the other day, be the kind of company where you would want your children to work."
Apotheker, a warm and charming German with a passion for technology, is aiming to bring a company that has experienced cultural whiplash from warp-speed IT industry shifts, chainsaw cost-cutting and three major CEO changes in a dozen years back to its roots as a technology innovator.
The new HP leader has made a point of meeting with hundreds of HP customers, employees and partners all over the world, listening closely to their opinions of what's right and what's wrong with HP. Not long after taking the helm, he was spotted in the company cafeteria chatting with a group of engineers.
HP insiders say engineers and employees are excited by Apotheker's vision of the future and how HP will play in a cloud software, services and connected devices world. He has brought a strategic vision that for the first time could unite the charged-up world of handheld consumer devices with complex Fortune 500 data centers. What's impressive, say insiders, is how quickly Apotheker has come up with a clear, compelling strategy to bring together all of HP. If there is another CEO that could have made this kind of impact so quickly, we can't think of one.
It is one of those beautiful sunny California days when we get to meet Apotheker in his second-floor office. Sporting a blue shirt and red tie but sans suit jacket, he greets us warmly, asking if we would like something to drink. His office has a large desk at one end with a bookcase behind it and a conference room table at the other. He says that the next time he returns to Paris he will bring back "some stuff with me so I can personalize my office a little bit." There is one telling personal memento that hangs on his wall, though--a plaque he received from the HP Americas Team when he took the job. It reads: "Americas Team Welcomes Leo Apotheker. One Team. One Way. One Mission." Apotheker was clearly touched by the gesture. "It felt really good," he said. "They are lovely people."
"I have to say," he continued, "I have rarely met such a crowd of motivated, smart, committed people. It is a pleasure working here."
Four months into the job, Apotheker is settling into Silicon Valley. He has bought a home and recently got his California driver's license, which required him to take both a written and a driving test. "Two tests," he quipped. "And a behind-the-wheel one because apparently if you don't live in California you don't know how to drive." Apotheker's sense of humor will win you over if you spend any time with him.
If Apotheker is feeling the pressure of getting his arms around a company that remains an icon of American capitalism with $126 billion in annual sales, he doesn't show it. He is as relaxed and personable as any CEO we have ever met. He answers the first question with a simple: "First of all, thank you for the opportunity." And then goes on to talk about his meetings with partners, driving home at every turn "how important the channel business is and how important the channel business will remain for HP."
"The first message I wanted to convey to them and I want to convey to you as well is that for HP the channel partners are a strategic asset, and we will do whatever we need to do to make sure they have a great future with HP."
In his 45-minute sit-down with CRN, Apotheker stressed again and again that he is firmly committed to HP's channel partners and he sees a big role for them in the cloud-connected devices era. "My channel vision is to turn the partners into a proactive force that innovates business models, go-to-market models, service models, where we all share the overriding objective to make the channel and HP truly delight our customers," said the 20-year-plus IT veteran.
Solution providers who have met with Apotheker said they see their HP sales and profit growth continuing under his leadership. What's more, they are making investments to expand their HP product portfolio with more HP software after listening first-hand to Apotheker's views on the future of information technology. Now his challenge is to win over the rest of HP's partners, starting with the thousands of solution providers he is scheduled to address this week at HP's Americas Partner Conference in Las Vegas. A number of those partners, by the way, were fans of his predecessor, former CEO Mark Hurd, and are looking for Apotheker to show his channel colors.
Solution providers who make the trek to the desert to hear him live are likely to be pleasantly surprised. After speaking with Apotheker, his lieutenants and solution provider partners who have met with him, here are 10 things you didn't know about HP's dynamic new CEO.
1: He Is Channel-Friendly
Apotheker has aggressively reached out to channel partners of all sizes in countries all over the world. When he makes a business trip he makes a point of meeting local HP partners, not only because they are selling HP products but to get "first-hand knowledge" of customers and the market. All in all, Apotheker has met with about 50 partners around the world including about 25 in the U.S., a number of whom were concerned before meeting him that the man with enterprise software roots would not be as channel-engaged as his predecessor, who is now president of HP rival Oracle.
Apotheker said HP partners should sleep soundly knowing that the company is firmly committed to them. "I know that many people in the channel were afraid that I was known to be a direct-sales, proprietary, get-out-of-my-way kind of person," said Apotheker. "That is actually totally not true. Even at SAP where I did build the world's probably best direct-sales force, it was hugely leveraged by channel partners, hugely leveraged. Without the channel partners SAP would have never become what it became. Not even close. So I have always worked with channel partners and if I could use this opportunity as I am talking to you, I want to convey the message again and again and again: I embrace channel partners in any language you would choose."
Gary Johnston, president and co-CEO of IT Partners, a $32 million HP-exclusive Converged Infrastructure data center partner, said he found Hurd's departure disconcerting but after meeting with Apotheker, he believes HP's channel commitment is unwavering. "He gave me a good commitment that HP is and will always be a channel company and that as HP moves to connected devices and Platform-as-a-Service, there will be clearly delineated places for the channel to play. I felt good coming out of the meeting. I felt like this is someone that can take HP to the next level."
Johnston's eight-year-old Tempe, Ariz., company, which started as a services provider and added HP's Converged Infrastructure products in 2004, is now ready to make another big investment in HP software and services to play in the cloud computing era. "We are investing in expertise around HP's software portfolio. That is absolutely critical. HP's Converged Infrastructure software is critical to realizing the vision."
2: He Is An Inspiring Technology Visionary
Make no mistake about it. Apotheker is a technology visionary. And he has a vision to return HP to the engineering-oriented, entrepreneurial innovator that Hewlett and Packard envisioned when they founded the company.
Vyomesh "VJ" Joshi, executive vice president of HP's Imaging & Printing Group who has worked under five HP CEOs, said he is excited by Apotheker's "bold vision" for the company. "It is definitely different from looking at HP as [just a technology] arms supplier," he said. "We are talking about a next-generation [cloud computing] architecture based on formidable market trends but then built out with new solutions. It really pulls everything together into an HP vision rather than an [HP] individual business vision."
Fred Traversi, CEO of AdvizeX Technologies, one of HP's top enterprise partners, compares Apotheker to computer industry giants such as former Digital Equipment Corp. co-founder and CEO Ken Olsen, who brought minicomputers, distributed computing and networking to businesses around the world. "Whenever you walked out of a meeting with Ken Olsen, he had such technology vision that you had to go home and think about it," said Traversi, a 31-year IT industry veteran who has met with a number of industry pioneers and sat down with Apotheker several months ago. "Leo clearly has that technology vision. It is easy to invest in a company with that kind of technology vision and leadership. I think Leo is the right leader at the right time for HP. He has a five-year vision that is very easy to connect with.
"I was struck by the depth and breadth of his technology vision," added Traversi. "He clearly understands how to use technology to help solve business problems. His whole orientation was the future of technology. I met with Hurd in his first month and he treated technology as a business. Leo treats technology as technology."
AdvizeX, Burlington, Mass., is making a sizable investment in HP mobility software, business technology optimization software and security software. Five years down the road, Traversi sees software sales shooting up from 10 percent of his business to 20 percent, and annuity services, which he calls an incremental new opportunity, accounting for as much as 30 percent of revenue.
3: He Hates The Term "Emerging Markets"
Look for HP to be much more active in fast-growth global markets under Apotheker, who is fluent in five languages (English, Dutch, French, German and Hebrew). But don't call them "emerging markets."
"I have a real issue with the term 'emerging markets,' " he said. "It is hard to qualify a country that has a 4,000-year history as 'emerging,' " he said. "It is not like they kind of popped out of the ocean."
Apotheker said HP is already "pretty active" in fast-growth global markets but wants to be "way more active." In fact, Apotheker said, HP will be working to make channel partners "an even more integral part of our strategy in building up these fast-growth markets."
Apotheker is making frequent trips to fast-growth markets around world and always meets with partners. He recently was in India and met with a wide cross-section of solution providers. "I try to reach out to them all because they have a very important role to play in helping us be a much better company in these markets," he said, noting that the meetings provide a critical "feedback mechanism back to HP, telling us what we should do better and how we should align better so that we can actually cover these markets in a stronger way."
John Edwardson, chairman and CEO of CDW, an $8.80 billion solution provider behemoth, said of Apotheker: "I think one of the things I like best is he is going to bring a global perspective to HP," noting that such a perspective will be key in ensuring that HP--as the largest provider of IT products--remains healthy and vibrant. HP is CDW's largest partner, accounting for about $2.64 billion, or 30 percent, of Vernon Hills, Ill.-based CDW's business. "We are just a North American company," Edwardson said. "But this industry is a global industry. He really is a man of the world. I think he is comfortable moving around the world and doing business around the world. You don't meet many people that are fluent in five languages. That tells you a lot about his intellect."
To the all-important question of whether the new CEO is up to the Herculean task of running the world's largest information technology company, Edwardson replied: "The answer is yes. And very well."
4: He Is Advising Partners To Change Their Business Model
Apotheker sees cloud computing as a "great opportunity" for HP partners. But, he said, it won't happen without partners adjusting their business models. "If they have an on-premise business model that is only based on servicing yesterday's world, they are going to have a problem," said Apotheker. "Not because I want to cause them a problem, but because the market is going to move away from them."
Apotheker said the cloud era demands that solution providers migrate to a more services-based business model. "My advice for channel partners [that I have met] was: 'Guys, look at your business model, look at the value-add that you provide, see how you can scale this with the help of the cloud. Because if you don't then you are going to end up doing maintenance and not future business. It might take 10 years. It might take five years. It might take three years,' " he said.
"They should change their business model so they work with the customer of the future, not with the HP of the future," he explained. "Both HP and the channel partner would like to service the customer. At the end of the day, it is a customer-centric world out there, not an HP-centric world out there. And I think they have to adjust to that. So what are the major things happening? Talk about mobility, talk about the cloud, talk about all of these various intersection points. That is where the future for our channel partners needs to slowly and gradually move toward. Because at the end of the day, that is what the world will want from them. They should sell what customers want to buy."
5: He Is Driving Big PartnerOne Program Changes
Look for significant HP PartnerOne program changes under Apotheker's leadership. He is pushing hard to combine hardware, software and services into integrated solution bundles that he wants partners to bring to market. And he is moving to get HP partners to sell the full portfolio, including software and services.
"I would try to broaden my portfolio as a partner. There is no reason why I should only be a partner for X or Y," said Apotheker, pointing to HP's security software portfolio as technology partners should bring to their customers.
As for getting partners to move aggressively into the cloud with HP, Apotheker said the technology giant should "provide all the channel incentives that we need to provide to encourage people to open their minds."
Stephen DeWitt, senior vice president and general manager, HP Personal Systems Group Americas, said he sees PartnerOne changing to get solution providers to make the same kind of investment in software and services that they made years ago to take HP's hardware products to market. "For many of the partners, this new dialogue that we are talking, this application level, this service level, is new business for them," he said, urging partners to move beyond transactional sales into the "fertile ground of applications."
"This is not a five point [sales] vision of a client device," said DeWitt. "This is now a sticky, tethered applications experience that should have better loyalty characteristics around it and higher margins." Not only that, DeWitt sees a big PartnerOne recurring revenue opportunity. "One of the seminal elements of our strategy inside the PSG side is transitioning away from a transactional model where the way we pay people, the way that we guide R&D, was based on the transaction to a lifetime value model where, rather than looking to make five bucks on the PC
I am going to sell you, I am going to make $5,000 on the relationship that I have with you and [the relationship] that my partners have with you [over a number of years]."
Jim Kavanaugh, co-founder and CEO of World Wide Technology, a $3 billion national solution provider giant based in St. Louis, Mo., said he would like to see PartnerOne aimed at driving 12- to 36-month investments in HP rather than at a monthly or quarterly sales goal. "You need to build a program that is sustainable and has some thought and substance behind it so you are investing not just for the quarter, but for the next 12 to 36 months," he said. "You can't drive anything long term if you are sales spiffing for 60 to 90 days. That doesn't drive long-term behavior and solutions that are good for the partner."
6: He Wants To Make HP A Security Software Leader
Apotheker has moved to quickly capitalize on HP's security software portfolio, which includes TippingPoint intrusion prevention systems, ArcSight security and compliance software and Fortify software security assurance offerings. During our meeting with Apotheker, he mentioned several times how important it is for partners to bring an HP security software solution to customers. "[As a channel partner], why wouldn't I want to embrace the security software portfolio of HP and add the security element to everything I would do for my customers which, by the way, customers would really appreciate," said Apotheker.
Apotheker's view is that partners bringing another vendor's security products to market are missing the mark. "The point is I think we have a very unique offering," he said. "Our job is to make sure that people understand that our offering is better."
Ann Livermore, executive vice president of HP's Enterprise Business, said HP's security software offerings are critical given the security issues that come up when moving businesses and government agencies to the cloud computing model. "Security is always on the list of things that are inhibitors," she said. "The more interconnected the world gets, the more opportunity there is for breaches in security. So when you think about that environment, security is technically a very complicated issue, and there is no company in the world better than HP at dealing with technically complicated issues and making them simple."
7: He Is A Good Listener
Nearly all the partners who have spent some time with Apotheker praise him for being a good listener. That could be critical as he moves to make changes at HP based on partner feedback.
"Sometimes you meet with a CEO and they kind of like to talk and listen to themselves. They will tell you everything and almost not allow you to ask a question," said Mark Romanowski, executive vice president at ASI System Integration, one of HP's top enterprise partners. Romanowski, a 35-year IT industry veteran, has met with nearly all of the top CEOs over the years. "Leo is different. He wants to hear what you have to say. He wants to have a conversation."
Romanowski said he appreciated Hurd's channel savvy, but he sees Apotheker charting an "extremely channel-friendly" course that will bring partners more software and services revenue. "He looked me in the eye and said, 'I can't do this alone. You are critical to our success moving forward. And the potential that we have together is huge,' " said Romanowski.
"Mark was an operational genius who came in and was able to cut costs and streamline the supply chain," said Romanowski. "But he also created the silos [within HP]. His successor is a visionary, a creative thinker who wants to grow the business, and invent and develop new things. What I like is he is saying, 'Let's do it with partners and the channel.' "
New York-based ASI, which has one of the largest technology services organizations in the Northeast, has always been an extremely services-oriented solution provider, but it intends to move even faster into software and services over the next several years. "Our software and services vision is very much in line with Leo's vision," said Romanowski. "We want to grow that business exponentially. That drives technology sales, customer retention and customer loyalty."
8: He Has Carried A Bag
One of the hallmarks of the Hurd era at HP was an aggressive HP executive account engagement strategy that put Hurd and his top lieutenants into the field with partners to win business. Apotheker, a self-described "sales guy at heart," said he will also do what it takes to help partners win in the field. "I carried a bag," he said. "So I sympathize with these people. So they can call. And I told them that in all our meetings. Here is my number. Here is my e-mail. If you need help, call. So we will do whatever we need to do to help these guys sell."
Kavanaugh said that Apotheker's sales and technology acumen should bode well for World Wide Technology. He said his company's HP sales have grown 20 percent over the past couple of years and he expects that sales growth will continue under Apotheker. "I feel very comfortable with the direction Leo gave with regard to his focus on continuing to invest in partner relationships and building out cloud infrastructures, private, public and hybrid," said Kavanaugh, who met with Apotheker earlier this year.
Kavanaugh said he is excited by the prospect of the cloud computing opportunity being even bigger than the dot-com explosion a decade ago. "The changes that we are going to see in the next two to three years will be pretty significant," he said.
9: He Sees HP As A Channel For Partners
Apotheker values HP partners for their entrepreneurial drive and spirit and is looking for them to step up to help build the next generation of HP webOS tablet applications and cloud offerings. That could result in HP's direct-sales force taking partner-developed solutions into the largest corporate accounts. "Some of our channel partners actually create additional specific [value] on top of our solutions that we could actually provide to these large accounts as well," said Apotheker. "A traditional view would say that our partners are a channel for us. In some cases, it is conceivable that we could be a channel for our partners. Why wouldn't that be the case? As long as it makes sense for everyone."
That kind of nontraditional view of the channel could spell big opportunities for solution providers partnering with HP. At the Americas Partner Conference, HP will conduct a daylong workshop for partners that will include a separate address by Apotheker around the HP webOS tablet opportunity.
10: He Pays For Performance
Look for Apotheker to institute a pay-for-performance culture with the HP channel. In fact, his last words to us were that he would "measure" the channel on performance. That mantra is one of Apotheker's management tenets.
When he was only three weeks into the job, Apotheker last year reinstituted salary increases in fiscal year 2011 as part of HP's normal annual review process. "I actually felt it was really important to give people that raise that they were expecting, if only because I believe in performance and pay-for-performance in a performance-driven company," said Apotheker. "Now we had a pretty good year. So there was no reason [not to give employees raises]. On the contrary. If we really believe in performance, then we should walk the talk and give people pay-for-performance, which is exactly what we did."
Romanowski said the pay increase for HP employees marks a turning point for the company. "That says a lot," he said. "It said, 'I believe in you. You are my most important asset.' At ASI, we say our people are our most important asset, too. Without our people we have nothing. That pay increase was a huge. Talk about a morale boost."
Romanowski said HP remains his company's "most important partner" and he expects a healthy increase in his HP product and services sales this year. "My feeling is HP is a great strategic partner and our relationship is only going to get stronger with Leo," he said.