Apotheker, Lane and the HP Way

Michael Vizard

In many ways newly appointed CEO Leo Apotheker is a good thing for Hewlett-Packard. During his tenure as co-CEO of SAP, Apotheker established a reputation for being smart, worldly, frank and honest, while at the same time respecting the traditions of SAP. However, depending on who you talk to, those very same qualities can be described as arrogant, cerebral and aloof, all of which contributed to his abrupt departure from SAP.

The character of HP's next CEO will be crucial because much of the dissension within the ranks stems from the engineering department that wields so much influence within in the company.


Apotheker brings to HP is a lot of software experience, an international perspective and a lot history in IT consulting that is so important to the future of IT. After all, SAP is the house that IT business consultants built.

Some might go so far as to say that Apotheker is a strategic thinker. Apotheker is a safe bet for HP in the wake of the tumultuous tenure of former CEO Mark Hurd and a nice complement to the existing operations-minded management team.

But while much of the focus is on Apotheker, the other overlooked component of the new HP executive team is Ray Lane, the hard-driving former president of Oracle that HP appointed to be its non-executive chairman. If anybody has an ax to grind with Oracle and Larry Ellison, it's Lane. So look for Apotheker and Lane to pool their collective skills to turn HP into a much stronger software company, probably starting with a raft of new acquisitions.

But Apotheker and Lane have had their issues. SAP was extremely slow in responding to the move to software-as-a-service and seems to have missed the ongoing evolution of business process management software. And while the acquisition of BusinessObjects represented a coup for SAP, it also illustrated how slow SAP's internal development processes are to respond to changing customer needs. Nothing illustrates that better than the poorly received NetWeaver platform that SAP brought to market as an alternative to middleware from IBM and others.

In addition, SAP tried to force through what amounted to major price increases that many key customers resented. Those price increases drove more customers not only into the arms of Oracle and Microsoft, but also to embrace SaaS offerings from Salesforce.com.

Lane, meanwhile, left Oracle because he didn't get the CEO post he wanted. Oracle went on under Larry Ellison to post financial results that are the envy of the industry. Lane deserves credit for helping make Oracle what it is today, but he's not known for having a light touch. And in the wake of Hurd, many HP employees may be too emotionally scarred to respond effectively to the bluntness that Lane is well known for.

HP faces a host of business and product challenges. On the business side, cloud computing is transforming the hosting business that anchors the EDS business that HP acquired. The hallmark of that transformation is smaller deals and shorter-term contracts, which put a lot of pressure on the existing EDS business model.

On the product side, HP has been holding its own in the server category against onslaughts from IBM, Dell and now Cisco. Its investments in IT automation are among some of the company's most strategic. But the PC business is mired in trench warfare and HP has been steadily gaining ground. But much of that success is being overshadowed by the emergence of tablets from Apple and a raft of similar devices running the Google Android operating system. How the acquisition of Palm is going to change that equation remains one of the more puzzling moves of Hurd's tenure. Then there is the vaunted HP printer business. While still strong, competition in this space is more robust than ever. And Apotheker and Lane are not hardware guys.

Obviously, HP still needs time to heal. HP is in no danger of collapsing given the experience of the current management team. And it will take some time for Apotheker and Lane to put their stamp on the company. At the moment, HP can afford that time. But nothing takes people's minds off their grievances more than winning. So in the short term, Apotheker and Lane need to show HP employees how the company is not only winning now, but also how they intend to keep HP profitable moving forward. That might mean more focus on the here and now rather than theories about what might come tomorrow. And if history is any guide, they will have about six months to show progress on both those fronts.

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