CEO Mark Hurd promised a major transformation of Hewlett-Packard's IT infrastructure to set an example to enterprise customers of how they can use HP hardware, software, and services to lower their own business IT costs.
In his keynote address at HP's Technology Solutions Group Forum running in Las Vegas, Hurd spoke of the need for HP, one of the biggest IT firms in the industry, to modernise and update its own internal IT infrastructure to lower its management cost on P&L; basis.
Hurd said that following rapid internal growth through several acquisitions HP was now faced with managing an increasingly complex IT infrastructure that was getting more difficult and costly to maintain.
HP has 5000 legacy applications and 750-plus data marts scattered across the company's various business divisions.
"We have a lot of IT scale. But there are both benefits and challenges to that scale," Hurd said. "In fact we found that the costs of our IT were increasing faster than the revenue of the company.
It took us nine months just to gather information on the shadow costs of [overlapping applications] and we discovered one every month or so."
Hurd expects the modernisation of HP's infrastructure will reduce the percentage of revenue it spent on IT by half (4% to 2%) on an annual basis over a three year period.
"It will not be easy or free," he said.
HP's plans include server virtualisation and moving more of its legacy systems onto Itanium-based Integrity servers. The company is also in the process of consolidating its worldwide data centres.
A current project already underway is to consolidate HP's 750-odd data marts into a gigantic 750-plus terabyte enterprise data warehouse - a throwback to Hurd's CEO days at high-end data warehousing firm NCR Teradata and CIO Randy Mott's stint at Wal-Mart, one of Teradata's biggest customers. The EDW will eventually support 50 000 users.
The EDW is being built on HP's new NeoView data warehousing platform that is comprised of standard server and storage components mixed with HP services.
The first EDW located in Houston went live in April 2006 and comprises 256 processors, 128 servers and 182 terabytes of storage. A similar-spec EDW is expected to go online in a couple of weeks. And an even bigger 382 terabyte EDW located in Atlanta will mop up the data mart consolidation effort.
HP expects to incrementally eliminate its data marts to zero by the middle of 2009.
Hurd's ultimate goal for HP's internal IT transformation is not just to set a shining example for the industry to follow. He also wants to reduce the company's maintenance expenditure so the company has more money to spend on innovation.
"We have lots of legacy apps and servers in our environment and much effort is spent on supporting these legacy systems. We now want to flip around the current maintenance and product innovation expenditure split of 70-30%."
In line with HP's greener-computing work in lowering power requirements for its own storage hardware systems, Hurd also aims to cut HP's own IT power usage by 50% as a result of its internal IT transformation.
"That is enough to power the city of Palo Alto [HP's headquarters in California] for one year."
Hurd also pointed to the 'consumerisation of IT' as having a significant impact on HP's future product development.
Hurd said that consumer IT trends are increasingly shaping corporate computing, pointing to the adoption of consumer-born technologies like instant messaging, blogs, and wiki technologies that are now starting to be absorbed into corporate computing environments.
"The military and the consumer are defining how the semiconductor industry builds its products today."
"There is no better technology company that is better positioned to leverage this trend than HP. Over 70% of the core components in a server are leveraged from our PC business."
Hurd also promised to improve HP's account management and partnership business, areas he acknowledged 'needed more work'.
"People love our technology. But a big complaint we have heard is how difficult it is to do business with HP."
Hurd said that HP had hired over 1000 new staff to bolster its enterprise sales efforts over the past year - with a third of those working in HP's Technology Solutions Group. He also said the company will be building closer relationships with its 140 000-odd partners to extend its customer reach.
"We want to go deeper into the markets that [our partners] cover. We are not there yet, but we are not confused about it."
Wrapping up his keynote Hurd said: We have plenty of challenges. But the market is playing to our strengths. And where it is headed is what we do best."
A former HP CEO once famously said "If HP knew what it HP knows, we would be three times as profitable. That statement still holds true today. HP's business is large, complex, and fast moving; the company is pegged to generate revenue of $100bn in fiscal 2007 and ships a printer every 3 seconds and a server every 10 seconds.
Clearly HP faces much larger and complex IT challenges than many of its customers. HP's internal IT transformation initiative, dubbed 'the business of IT' is an interesting lead-by-example strategy. That it should headline an opening day keynote session is even more so. If HP can walk its talk then it will provide the company with perhaps the mother of all business case studies and encourage its customers to do the same - with HP products and services of course.