The Old Guard: Out of the Frying Pan and into the Frying Pan

Steven Hill
Steven Hill

Summary Bullets:

  • The decision for HP to split into separate consumer and enterprise companies is long overdue, and done correctly it will allow both siblings to be more responsive to their respective markets.
  • By shedding low-margin business units IBM is doing the right things to allow them to continue as innovators without bogging themselves down with manufacturing considerations.

No other industry moves as fast as IT, and every vendor faces the challenge of evolving to remain current with the changing nature of this business. But the challenges for old-school industry stalwarts like IBM and HP are a little different, in part because they’re still simply perceived as “old-school” (irony intended), plus they have a legacy of products that they must continue to sell and support. Does this mean I give them a pass on everything they do? Not on your life – but I certainly admire the commitment it takes to recognize their own weaknesses and make the tough choices.

Case in point: IBM. For over a century IBM was forced to be both an innovator and a manufacturer, because there were literally no other companies doing the futuristic work they were into. There were no alternative vendors and everything they needed had to be crafted out of whole cloth (as it were). Jump to the 21st century, now there’s multiple companies that have elevated chip-fab and x86 server manufacture to a fine art, making it possible for IBM to step away from these highly competitive endeavors and look to its core strengths. To me, IBM is a company that focuses on solving big problems. As a technology innovator, IBM has topped the patent charts for the last 22 consecutive years, and as a solutions company, IBM still leads the industry in the depth and breadth it offers; not to mention IBM Global Services, which is the largest support/services/integration practice in the world. I, for one, would rather IBM continue after the broader goals of applying technology to the world’s problems rather than remain focused on cranking out IBM-badged servers.

For HP, I always thought the sheer scale of their combined consumer and enterprise offerings was a lot for a single company to manage. Though some would argue that the two divisions didn’t really overlap much, I contend that the creation of the two new companies, HP, Inc. for consumer and Hewlett-Packard Enterprise for business will allow HP to better react to the substantially different consumer and enterprise markets, and the challenge for the new HP’s will be to insure that these companies actually become more flexible than the current HP monolith. This will also allow HP to separate their financials to decouple the enterprise and consumer businesses to reflect the performance of those substantially different markets more accurately.

While we’re at it, it’s worth mentioning that Wall Street’s considerations are often contradictory to those of the IT industry. Not every company has the luxury that Dell had to go private to make the changes they needed to make, and out of the glaring spotlight of public opinion. But history shows that these kinds of changes are often like pruning a tree; it always looks really bad at first, but given time it usually turns out to be for the best-regardless of what the IT and financial press may say.

What do you think?

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