Third-Quarter IT Reality Check — Budgets, Hiring, Trends
I’m at Dell World this week and I’m struck by the differences between HP and Dell, largely because in most of my meetings, the Dell executives are methodically pointing them out. What I find fascinating is that this feels like a very political process – one focused on trust and execution. The only actual politician, Meg Whitman, is the opposition. Rather than being the clear winner, because of her experience, she is getting trounced—no that’s not a strong enough word, she is getting obliterated— largely by doing the same things her predecessors Carly Fiorina and Leo Apotheker did.
Let me explain.
IT and Trust
The IT industry is by nature very conservative and it really doesn’t respond well to change. This seems very strange to those not in IT, because the rate of change in technology appears to be far faster than in any other single area. So you’d think they’d relish it, largely because they have no real choice.
We (i.e., the IT buyers, reporters that cover IT and analysts) tend to favor vendors much like we tend to prefer politicians—though in both cases this doesn’t always drive our choices. We want people that say what they’ll do and do what they say. We like stability in the companies we buy from and cover because that stability lowers the risk that our purchase or opinion will turn out badly. Many of us clearly vote very similarly in elections—we vote for certain politicians largely because we believe they will do what they promise they’ll do when elected. Unfortunately, we are often disappointed.
Our ideal politician is more like George Washington (the never tell a lie guy) and less like the last few U.S. presidents. This is the core of the point Michael Dell and his team are driving at Dell world—you want an IT company more like Dell and less like HP.
Michael Dell vs. Meg Whitman
Except when performing a turnaround, technology companies should be run by subject matter experts. Our biggest and latest example of this was Steve Ballmer’s Microsoft. Unlike other problematic CEOs, Ballmer didn’t have his hand in the till, he wasn’t diddling an employee on the side, and he wasn’t kicking back and letting everyone else do the work. The guy busted his hump and Microsoft stalled. The new CEO at Microsoft has appeared to make more solid progress in the few months he has been at the helm than Ballmer did in a decade, because he knew more about what he was doing. He doesn’t work harder than Ballmer (I doubt that is possible); he works smarter.
Public companies are measured on their stock performance and private companies on the advocacy of their customers. We don’t get quarterly financial reports from private companies and with public companies, these quarterly reports tend to obliterate everything else. This means that we tend, as buyers, reporters and analysts, to trust private companies more than public companies, because the private companies’ goals are clearer. But we often don’t hear from private companies as much, so our impressions are less well defined.
So going in, Meg Whitman has more voice because she is leading a public company and she has a unique skill set as an ex-politician. But Michael Dell isn’t being pulled between activist investors and customers anymore, so he can be much more focused on the latter.
In execution, we saw Whitman argue vigorously that HP was better together (reversing her predecessor’s strategy). When PC fortunes improved and the company’s printing division released what could be an industry changing 3D printer and a related PC, instead of pointing out that she was right, she flip flopped and announced that she was spinning out PCs and printers. When questioned about this, her responses reminded people of politicians—and not in a good way. She just seemed disingenuous. Why change your position at a time when it looked like your prior position was vindicated? Granted, even though the HP stock was down after the news, it was nowhere near as bad as the last time it announced doing the same thing. That time, HP stock dropped a whopping 24 percent and it got Whitman’s predecessor fired. One of the first tweets I saw after the news referred to “the ghost of Leo Apotheker,” and that wasn’t good for Whitman’s image at all.
In contrast, Dell, which is reporting even stronger results in the PC space than HP did, is doubling down on the PC business and showcasing that Michael Dell’s promise of taking the company private and then focusing more on customers is being fulfilled. Michael Dell said what he was going to do and then did it.
Insanity
We saw Carly Fiorina make promises she couldn’t keep, and her time at HP was largely defined by layoffs, executive changes and big deals (in her case, the Compaq merger) that she wasn’t able to justify well. She not only lost her job, she became unelectable in politics. With Whitman, we are seeing very similar behavior—sequential layoffs and massive executive churn—and her big deal (splitting the company) runs against her promise to keep the firm together. So the market doesn’t seem to be buying her justification for doing it.
On the Dell side, the company is growing impressively, with its only real competition being Lenovo. And Lenovo is modeling itself more like Dell, in sharp contrast to HP’s execution. Dell did have a voluntary staff reduction as it pivoted after going private, but the vast majority of executives I’m seeing this year were here before the firm went private, and several have left and come back over the last decade.
Wrapping Up: The Importance of Perceptions
At Dell World this week, the very interesting political difference the executives are driving is that of perception. You can trust Dell to say what it’ll do and do what it says; HP, not so much. And it continues to fascinate me that Whitman, who should have learned how to control a message when she ran for office and failed, did not. She still hasn’t. I doubt this will end well for her or HP unless this changes. For Dell, however, it is going swimmingly.
One final thought: I think every one of us has a lesson we failed to learn, and that failure defines the disappointments in our lives. For Whitman, I think she has failed to learn the importance of perception and the critical need to control her personal brand. That has cost her the California governor’s race, and it may cost her the last CEO that job she’ll ever hold. As for Dell, it is on message in regard to trust, which is likely the most important attribute of a CEO’s and company’s brand in IT, and at Dell World, Michael Dell executed this well.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+
