Interview: HP poised to build on its strengths

Mary McDowell, senior vice president and general manager for industry-standard servers at the "new" Hewlett-Packard Co., is on top of the world. Armed with the combined hardware and software resources of both HP and Compaq Computer Corp., McDowell is preparing to launch HP's first servers based on Intel Corp.'s Itanium 2 processor, a move that promises to shake up the server world as HP begins to gradually transition its RISC customers over to Intel. In this interview, McDowell talks about the challenges facing the new HP and how well the company is faring following the largest merger in the history of the industry.

Q: You're now handling the combined resources of HP and Compaq as well as preparing to launch the first Intel Itanium 2-based servers, which is a huge commitment as you transition RISC customers onto Intel. Does now seem like the inflection point for everything you've ever learned about the technology business?McDowell: It does. I mean, we are really poised to be a tremendously formidable competitor. [We've got] strength in Windows and Linux, we've got strength in the enterprise units, we've got the new opportunity -- as you mentioned -- with Itanium 2, we're No. 1 in SANs, [and] a leader with OpenView [software]. If you tie all this stuff together, we're going to have data center answers that no one will be able to beat.

Q: Even with a tough economy?

McDowell: More so. True, the hardware-buying frenzy is pretty much over, and certainly people are continuing to do selective upgrades or selective additions to their infrastructure. But for the major purchases, they want to engage in a new level of conversation. How do we think more about the technology we use? How do we think about consolidation? How do we look at provisioning and other architectures that make better use of our hardware investment rather than just getting 10, 50, 100 more hardware boxes. And HP had this cool thing called Utility Data Center, which actually virtualized the network data and tries together] that layer above the server and storage virtualization. So when you tie that together you start to talk about ideas of variable cost, which is extremely appealing to the CIO/CFO community who are ultimately going to be setting the budgets and the targets for the customers.

Q: Are customers, and vendors, ready for utility computing?McDowell: Selective customers are, and some of this goes back to the early work we were doing with service providers who kind of pioneered the model when their growth rates were so explosive, and we do have a number of what we call "computing-on-demand" type of customers, which can be everything from leasing to computing and storage as a utility, which is where I think everyone wants to go ultimately. I think certainly in the executive ranks of major companies they are interested in pursuing computing as a utility -- though I don't think that vendors, as a whole, are ready to provide it. So I think you do have to have the technology wherewithal, particularly on the management side as well as the services capabilities, to pull the pieces together for utility computing. So you're not going to see a commodity player like a Dell be able to do this.

Q: IBM has chosen not to offer an Itanium 2-based server. They are going with their own Power chips. Will HP attack that as an IBM weakness?McDowell: I would say that as we look at the competitive landscape, IBM is the one we have in our sights; we certainly think we can bring some key advantages to customers relative to IBM. Sun is trying to change their business model, but I think they're caught trying to fight a two-front war and they're quickly running out of ammunition. I know how I make money on a thousand-dollar box. I don't know how Sun makes money on a thousand-dollar box, and that's quickly where hardware's going.

Q: Are Sun customers picking up the phone and calling HP?McDowell: Well, I think one of the sort-of silver linings in a bitter proxy fight is when the smoke clears everybody wants to talk to you and find out what's going on. And particularly here in the New York financial district, there is huge interest in migrating away from Sun. And depending on what their issue is, say if it's an issue of cost, we can come in with Linux on Proliant and put a great solution together. If it's concerns about reliability -- and Sun certainly has some issues there -- we can offer HP-UX either on PA-RISC or on Itanium and beat them that way. So I think between the UX play and the Linux play we've really got Sun.

Q: Are customers these days more outspoken about their technology needs?McDowell: You know, I think we've had the luxury in the technology market of asking the customers to respond to our cycles. Oh, new megahertz? Yes, swap out all your boxes. New service perks? Jump, jump, jump. And the customers are now saying, "Those days are over. We can't afford the staff to keep up with you. You need to keep pace with us. So give us the tools that make infrastructure respond to our business cycles and we'll tell you when we're ready to buy." Which I think is a fair point.

Q: Is Linux going to create a mass migration from Windows due to the low cost of open-source software? And with that idea, how will HP balance three OS offerings?McDowell: We're certainly seeing a lot of interest in Linux, particularly, as I said, in the banking community. And these companies were the bellwethers that went to Sun in the 80s, that went to Windows in the 90s, then went back to Sun in the late 90s. So they have been a good technology bellwether for the rest of corporate America. What we're seeing is Linux not just necessarily for edge application but also application server displacement for Sun. So we've got a number of major pilots going on. We've got new partnership with VM-Ware to start to do some partitioning on Linux systems, add some stability. And there's a lot of work that has to be done to make the tools and things that people are use to [available] on a Unix platform, on a Windows platform, at parity on a Linux. They're not quite there today. So there is certainly a fair amount of systems integration that has to go in pulling enterprise-class Linux systems together, but we're well positioned to deliver that.

Q: Why then would the conservative banking and financial community be so interested in Linux if it's still a fixer-upper?McDowell: Well, I think these are groups that do tend to have a lot of technology talent on staff that may want the flexibility because technology is their proprietary value-add. So I think they are willing to make some of that extra investment to pull the pieces together.

Q: You mentioned VM-Ware. What's going to happen with virtual machine technology from HP?McDowell: One of the things that I think has been a challenge for Windows servers in the past is people have been reluctant to put more than one application on a single machine, and this has led to this explosion of machines. So if there are tools that enable you to have multiple apps in the same machine and even if an individual instance of an app fails, the overall system stays up and running. That's tremendously appealing to the consolidators of the world.

Q: Isn't that a throwback to mainframe mentality?McDowell: Yeah, but it's a heck of a lot cheaper and more open. But it essentially is. You know, I think that when we first started out doing Intel servers we talked about the price performance benefits. We've demonstrated that, now [we're at] the next level of, "Let's have the systems with our mainframes." But on this relatively dirt-cheap hardware platform, it's a heck of a deal for corporate customers.

Q: Do CXOs care anymore about speeds and feeds, or do they now just look at solving their business problems?McDowell: You know, I think that what the recession has brought about is a movement away from vendors dictating, "Here, I'm turning, you've got to turn with me," to [the point where] businesses [are] saying, "Slow down there buddy, you need to be responsive to my requirements and my requirements are these product cost issues." And so, for CXOs the latest, fastest box is of almost no interest because there [are] 10 other guys that have the latest hot box. I need to be able to tell the broader story, and that's certainly what the new HP, I think, is best positioned to do in the marketplace.

Q: Would you ever have Dell build anything for you?McDowell: No.

Q: Give us your advice for companies looking at the new HP and saying, "Okay, we know the value. We've done business with them before. We're ready to re-engage."McDowell: Well, one of the things that the new HP brings is tremendous strength across multiple product categories. So as IT has requirements for their infrastructure and encourage their people to be looking across platform, HP can tell the broader story.

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