HP's Hurd dings cloud computing, IBM

ORLANDO, Fla.--Cloud computing? It's got its place, but apparently not one very close to the heart of Hewlett-Packard Chief Executive Mark Hurd today.

At the Gartner Symposium here, Hurd said cloud computing has promise but that he and customers he speaks to are leery of moving important applications to another company's infrastructure outside the company's own firewall.

"I think it's a very attractive model, but there will be challenges," Hurd said. "At the end of the day, if you tell a CEO, 'Put our e-mail in the cloud,' a certain amount of CEOs will tell you not (to). If (HP Chief Information Officer Randy) Mott told me, 'Put the general ledger up in cloud,' I'd say go back to work, we're not doing that."

The cloud is real for many consumer services, he said. So why isn't it suitable for HP's core financial records stored in the general ledger? Security, for one thing.

"We get about 1,000 hacks a day. They're more sophisticated every month," Hurd said. "Security and reliability is a huge thing. It's unlikely we'd put anything outside the firewall that's material in nature that we couldn't 100 percent secure."

Hurd also said cloud computing has a branding issue among CEOs he speaks to. In one gathering he was doing fine until he raised the issue.

"I got a lot of boos after that...From a nontechnical CEO perspective, 'cloud computing' does not sound very clear to them," he said. The message he gets from those CEOs: "If this cloud computing is so cool, try to break this down into simple clear services that help my business be a better business."

Moving beyond services
In an onstage interview, Hurd also described HP's overall strategy, starting with building blocks of servers, PCs, networking equipment, and storage at the foundation, working up through software and putting services at the top.

Well, at the top for now. HP is headed for another layer: specific services packaged for particular customer segments, or "verticals" in industry parlance.

"The natural outgrowth for us will be more focus for us on vertical solutions," he said. HP won't get into practices for human resources or executive compensation, but will work in areas in which it can extend its computing technology ingredients.

Hurd said that spanning this range of products and services means that scale matters, for example in bargaining with component suppliers. Here, he dinged competitor IBM for selling its PC business to Lenovo, though without mentioning Big Blue by name.

"When a company would sell off its PC business, for example, you would have a problem because you would no longer be as big a customer to all those people who supply products to that supply chain," Hurd said.

He also took a potshot when asked about how HP's strategy differs from IBM's.

"I don't follow them very closely," he wisecracked. "It sounds like they're trying to chase us."

Beefing up sales
Gartner analyst Donna Scott said big customers find HP easy to deal with, but for others, the company is fragmented.

Hurd acknowledged there are problems, but said HP is working on them.

"We have a strategy to sell more. If somebody is interested in buying more, our strategies are aligned," he deadpanned.

In particular, when it comes to revenue growth, HP is aiming at smaller companies, he said. At present 70 percent of spending on IT comes from HP's top 2,000 biggest accounts.

Hurd pointed to an emphasis on sales as one area where he's trying to shift HP's culture.

"(Company co-founder David) Packard used to say, 'If we build great products customers will find them,'" Hurd said. "We actually want to sell them too."

Revamping HP's own IT
Hewlett-Packard has focused on cutting costs of its own computing infrastructure. In 2004, the year before Hurd took over as CEO, "We had $79 billion in revenue. We made $3.5 billion (in net income). We spent $75.5 billion." So, he asked the company's staff, "What do you spend it on?"

IT was a big part of it, accounting for $4.2 billion. Of that 82 percent was just to keep things running.

"One of our big spends was IT. We had more IT professionals in the company than we had salespeople," he said.

"We had IT spread out. Everybody had a little bit of ownership," Hurd said. There were 87 data centers, 6,000 applications, 19,000 people, 24,000 servers, 20 petabytes of data stored at 700 data marts.

The company "flipped the model," cutting expenses and redirecting funds to the future instead. "Our spend is down 40 percent and our innovation is up 2X in dollars."

It was painful and HP made mistakes on the way, but it was a personal priority for Hurd.

"I get a lot of CIOs who show me how bad their IT is," Hurd said. When he sees it, "My first reaction is it's because of a bad CEO."