CRN Exclusive Q&A: Whitman On Sales Gains Vs. IBM-Lenovo, Cisco And A Fractured VCE

Whitman Opens Up

Hewlett-Packard CEO Meg Whitman spoke with CRN Friday on a wide range of issues, including HP's plan to eliminate an additional 16,000 positions; gains the company is seeing against IBM with the yet-to-be-finalized sale of the x86 server business to Lenovo; networking sales traction vs. Cisco; and what she says is a Cisco-EMC-VMware VCE alliance that is starting to 'fracture.' Here is an excerpt from the conversation with Whitman.

What impact will the additional 16,000 job cuts have on the channel?

It is actually going to impact them positively because there is going to be a simpler, more nimble, faster-moving HP that is going to be far more customer- and partner-centric. This is a big, complicated company that has grown up over years of acquisitions and multiple systems.

Just in sales compensation, we have over 200 systems. In sales ops, we have so many different issues that we have got to address. This is going to be a simplification. We are going to be able to do more with fewer people. And we are going to take some of those savings and pour it back into R&D for great products for partners.

How much room is there to make HP more efficient?

A lot more room. We have got a lot of running room here. It is a big priority of ours. I hope the partners will see a lot of progress over the next six months.

The longer I am here, the more I see opportunities to be more efficient and more effective with faster decision-making. It is a new world order. I think speed is as important as just about any other attribute of a company today in this business. It is going to be easier to be faster with a simplified organization.

Talk about how the siloed business unit model that was in place before you took the helm has affected the turnaround.

Siloed businesses worked for this company for many years. I think when [former HP CEO] Carly Fiorina arrived there were 86 different business units with their own P&Ls, with their own HR, their own finance, their own legal, their own sales force. But, ultimately, given where the industry has gone and where it is headed, we can't just run siloed businesses.

Look at our Helion cloud launch -- it has pieces from ES [Enterprise Services], pieces from EG [Enterprise Group], pieces from software and it has its own dedicated sales force.

Talk about George Kadifa's new role as executive vice president of strategic relationships.

I asked George Kadifa (pictured) to move from software to strategic alliances. We have got to figure out how we show up as one HP. We are better than we were, but I am still not satisfied. It is as true for partners as it is for direct customers. I hear it every day from partners. George is going to help pioneer taking that whole thing to the next level. I think it is just going to make us stronger.

Talk about the push for sales growth.

Our objective is to return this company to growth. What I am pleased about is we have had three quarters of basically flat revenue. You might say, 'Well, gee, that doesn't sound very good.' Well, you will recall we had a few quarters of negative seven, negative six, negative nine. So flat seems pretty good to me right about now. But, ultimately, we need to return to growth. That is going to be around solutions. It is really around the partners. It is why I have invested as much time and effort into partners because they will have to help lead us back to growth. And we are seeing some pretty good signs actually.

How did the channel perform in the quarter?

Indirect grew faster than the direct business this quarter. We are excited about it. The outreach, the PartnerOne program with Platinum, Silver, Gold, the Inner Circle, the products, the turnaround time. All those things are starting to make a difference. These things take time, but we are feeling pretty good.

What kind of sales traction are you seeing in wake of IBM's yet-to-be-finalized sale of its x86 server business to Lenovo?

We have heard from thousands of customers and partners that tell us HP is the only IT company out there who can be a strategic partner end to end for the SMB, the enterprise and the public sector. So we are feeling really good about this. We have got more than 600 reported wins over IBM in four months. We are seeing more interest every single day. The pipeline is building dramatically.

We are seeing a lot of folks from the [IBM] hardware business wanting to come to HP because they are sure that [IBM-Lenovo] is not the future.

What kind of traction are you seeing vs. Cisco in the networking business?

We had a very good quarter, up 6 percent. We outgrew the competition. We gained share. It is really around the ease of use of our HP networking products and the channel is picking those products up better than they have in the past. And it is more cost-effective. What we know about Cisco is there is a very significant price umbrella that has stood for many years but now it is harder and harder to justify when you have alternative products that are as good -- if not better. We have had some very important data center wins as well as campus branch and edge.

What kind of impact are you seeing from mixed signals in the market with regard to VCE converged infrastructure?

I am not sure how much money they are making in VCE, but I have to say that has been a successful product. But that alliance is starting to fracture. You saw [Cisco CEO] John Chambers say the other day they are out to crush VMware, which is a little inconvenient if you are in a joint venture with VMware and EMC. So I'd say there is a fair amount of tension in the marriage. It is a little hard to say we are going to crush one-third of our joint venture. So I think that has provided an opening.

What kind of sales traction are you seeing with HP's Converged Infrastructure organization?

[HP Senior Vice President and General Manager Converged Systems] Tom Joyce is doing an excellent job running converged infrastructure. Shark is off to a very good start, particularly Shark SAP HANA. The pipeline there is very good. The sell-in is very good. We are feeling good about our converged infrastructure.

What kind of increases will we see in HP's R&D investment for 2014?

We did say in our launch of Helion that we are investing about $1 billion in cloud and cloud-related products. We did increase R&D investment this quarter year over year as we have almost every quarter. And we will continue to invest in R&D as a company. It is the best dollar I can spend. If I have an extra dollar to spend at HP, I will put it into R&D all day long because this is what we are so good at. This is where you put a little bit of money in and you get a lot back.

How big an advantage is HP's engineering innovation DNA?

It is just super-impressive. I think it is one of the core competencies of Hewlett-Packard. It is just so gratifying to see our engineers go with OpenNFV; Apollo, the next water-cooled server; Gen9, Moonshot, midtier 3Par, flash storage array. It is just incredible what these guys do: Ink in the Office, Ink Advantage, the multifunction colored printers, managed print services. You just give these guys a little and you get a lot. I should give them more. It is not complicated.

What is the biggest misperception about the turnaround?

People are always impatient. I am constantly reminding people we are halfway through the turnaround and people are like, 'Why aren't you done?' Well, because I said it was going to take five years. It is a very impatient world. Five years is hard for people to grasp. What I have always said is you are going to see progress. You see progress along the way. But people sort of think it should be over.

How is the Helion cloud resonating with partners and customers?

It is resonating really well because, of course, it is a hybrid cloud environment built on OpenStack. No one else has this. EMC- VMware has a hybrid cloud approach but it is built on a proprietary stack. So it is a real point of difference. People are pretty excited about it. They were stunned that we put out our own first community distros of OpenStack only two weeks after the latest release of OpenStack Icehouse. We are pretty excited about this. I think this is going to be a big point of differentiation for us.

What is the enterprise sales call to action as the channel goes into the last two quarters of the year?

On the enterprise side, I would say let's take IBM share right now. That is an opportunity for all our channel partners. The second thing is 3Par midtier storage. 3Par midtier storage is exactly the right product for this new style of IT. And everyone should have confidence in networking, given the last couple of quarters. On converged infrastructure, pick a workload and go after it.

And then I would say to the channel if you don't do software with us, pick one software product: IT Operations Management, Vertica, Autonomy, security and get to know us on a software basis.

Talk about the strength in the PC and Printing Business.

On the PC side, the channel must be feeling pretty happy about the commercial PC business. It is particularly up for us and we have a killer product lineup. Then printing -- laser, ink, Ink in the Office, Ink Advantage -- a lot of opportunity on the printing side of things. When I was in Europe, in particular, the channel is really going after managed print services. As everything moves to a service, people are quite excited to think about moving their entire print operations to a channel partner to run for them. And then, of course, the channel gets the annuity on the supplies.

What is the biggest challenge going forward with the turnaround?

The market is changing very fast. We have to be nimble. We have to be fast. And we have to keep the innovation engine going while we restructure the company to be more effective. But I would say it feels like there is a really nice rhythm happening here now. Everyone understands what is going on and that makes it easier.

I think we are getting into an operating rhythm and cadence that makes this easier. Everyone now knows what we are supposed to do and now we are just going to go do it.