Picking HP's Next CEO

Rob Enderle
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HP is at a crossroads. Financially it's in very good shape,but Mark Hurd, the recently fired HP CEO, sacrificed employee loyalty and long-term strategic goals. IT Business Edge's Lora Bentley correctly argues this week that getting rid of Hurd was a good decision.


However, the market is about to make a major shift, and HP may have the best product set to ride the wave. But Hurd had not prepared the company adequately for this change. The next CEO, on top of being a warrior, will need to hone HP into a fighting machine so that when this wave breaks, HP rides it to success and isn't buried under all the water. The bidding war for 3PAR, as it turns out, is an indicator of both the promise and problem facing HP and should help us qualify the ideal candidate.


HP: The Whole Not Yet Greater than the Sum of the Parts


At the core of the battle between HP and Dell for 3Par is the backstory that Hurd didn't want to pay a premium for the company in order to protect short-term financial results. This would have protected Hurd's huge bonus, but left HP vulnerable to a variety of competitors long term. Adding insult to injury is the sense that 3PAR employees don't want to work for HP. Many left HP because both Hurd and his predecessor, Carly Fiorina, made it a risky place to work. This feeling is exacerbated because they likely are hearing the same stories as I am of Palm employees who have been rapidly abandoning their new company for greener pastures at Google and Apple.


On top of this, Oracle, IBM, Microsoft and Acadia-the joint venture between Cisco, EMC, and VMware-are all reportedly seeing a massive interest in virtualized desktops, suggesting the market is about to make a move similar to the one that initially drove the PC in to replace terminals and centralized computers. Only HP has all the hardware pieces, from a viable existing set of thin client offerings to cutting-edge Palm smartphones and tablets at one end, and mixed server/networking/storage solutions on the other. HP will have to partner or create the software that makes this all work, and get divisions who often don't work well together to function as a team, but it is, on paper, the strongest hardware vendor in this space. But this appears to be a software- and services-driven opportunity, and while HP has clearly closed the services gap, it lags Oracle, Acadia, Microsoft, and IBM significantly in software. Its relationships with Microsoft are stressed and VMware's loyalty is questionable, given that company's tie to Acadia.


CEO Skills


Loyalty: Without establishing HP as a great place to work again even if it acquires companies like Palm and 3Par, it won't hold the critical people and never reach the critical mass necessary to have a complete solution in time. It really doesn't matter if HP has all of the parts because all that will do is put a spotlight on its critical human resources and make the company a feeding ground for recruiters as this market ramps up. The No. 1 skill that the new CEO will need to demonstrate is the ability to create and maintain loyalty because, without that, little else will matter.


Vision: This new wave will require all of HP work as one, even rogue organizations like Printing and Imaging, will need to become more of a corporate asset, even if it means more aggressively moving to paperless technologies. This vision has to be based on what HP should become, not a force-fit of the resources that HP currently has. To fit that vision, the successful candidate should be able to both add capabilities that HP lacks and not be afraid to spin out large portions of the company if they are viewed as not strategic to this overall goal of creating a company for the current century. This is a combination of Fiorina's broad ideas and deep commitment and Hurd's willingness to execute to accomplish what is necessary.


Consumer-to-Large-Company Experience: Ideally the candidate should have experience at both ends of the market because this wave isn't happening at one end or the other; it's clearly hitting both ends at once. Apple/Google represents what is largely the consumer impact, while the changes at IBM, Oracle and the creation of Acadia indicate changes at the other end. HP spans these markets, and missing one side or the other would significantly reduce the outcome for HP.


The Ideal Candidate May Come from Outside of HP


Neither Todd Bradley, who heads the Personal Systems Group, nor Dave Donatelli, head of Enterprise Servers, Storage and Networking, has the necessary breadth individually to get the job done. Vyomesh Joshi, head of Printing and Imaging, and the head of Enterprise Business, Ann Livermore, have the loyalty, but they aren't well-positioned for the solution, and Shane Robison, chief strategy and technology officer, has the vision and loyalty aspects, but has positioned himself to be the power behind the throne and likely is more critical in his current role. This leaves the best internal candidate as Donatelli, but the existing board may want to hold him in reserve as a strong No. 2.


Ideal industry candidates would include Tim Cook at Apple and Pat Gelsinger at EMC. Cook would immediately give HP some valuation upside and his combination of Apple pedigree and operational experience would be a natural fit on top of Donatelli' s expertise. Gelsinger, isn't as well known, but has the necessary breadth to do the job. He was thought to be the heart of Intel and could best address HP's morale problem. An outside and interesting choice would be Safra Catz from Oracle, though I doubt she would take the position, as she is the power inside of that company and arguably the most powerful woman in technology today. HP may instead look outside of technology for its choice and, much like IBM did, get its own Louis Gerstner.


Wrapping Up


Whoever is chosen will have a unique opportunity to recraft HP for the coming massive changes in the market, from PCs to servers, from services to software, from what we know to what we don't know yet. We are entering what may be the biggest change since the birth of the PC, and HP is one of the few companies that could emerge dominant after the dust clears. Its next CEO will either assure that dominance or make sure someone else gets that honor. No pressure, no pressure at all.

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