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SEPTEMBER 26, 2000

© Copyright 2000 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Good morning.

It is my pleasure to speak to you today.

All of you are about to spend the next few days exploring and absorbing the latest and greatest advances in networking, telecommunications, and Internet technologies.

My role this morning is to give you a framework … a context … for assessing all of these incredible technology advances. So today, I want to focus on four things:

  1. The shifting technology landscape
  2. The new business imperatives
  3. What we believe are the technology tenets of this new era
  4. And how we’re addressing all of this from a systems strategy perspective at HP

Let’s start with the shifting technology landscape.

You heard us start the discussion about Internet-based services …

e-services … more than a year ago.

Any process, any application, any asset that can be digitized … and delivered over the Web …will be.

It’s about services interacting with other services, dynamically, on-the-fly.

Whole chains of transactions will be electronically brokered … behind-the-scenes … while you do better things with your time.

You’ve heard us talk about an always-on infrastructure required to support this swarm of transactions … an Internet-based infrastructure as available and reliable as water. As pervasive … as the air we breathe.

And you heard us talk about the rise of millions of new information appliances – basically anything with a chip becomes a platform for the delivery of services … an opportunity to serve customers, to drive revenue streams, to fuel growth.

This world is clearly emerging.

Just look at the market for mobile services delivered over cell phones that’s developing in Europe and Asia.

In the work that we’ve been doing through our mobile e-services bazaars in Finland and Singapore, we’ve played a role in developing the first generation of mobile services that have come to market … including:

  • Transactional services – like banking and travel reservations …
  • Information services – particularly sports scores, and real-time news …
  • Search services – think of yellow pages and translation services …
  • Entertainment services – like custom ringers, games
  • Personal services – for calendaring, or your address book …
  • Communications services – like SMS, and mail …

All of these services represent huge revenue opportunities -- SMS text messages, alone, now represent about 8 percent of total mobile revenues in Europe -- roughly $10 billion -- and that figure is growing exponentially.

And the mobile market is just one of the interesting Internet landscapes that’s emerging. There’s the B2B Internet. The B2C Internet. The broadband Internet. And the nascent embedded Internet.

The shifts ahead … the opportunities … are massive …and our customers see them all coming.

During the last five years, conversations with customers about Internet technology have typically centered on making business processes more efficient:

    • e-commerce was essentially about making the process of interacting and transacting with customers more efficient,
    • e-business was about making back-end systems and processes more efficient …

Today those conversations have shifted.

While customers still talk about business processes, they want to talk to us about something much bigger … more universal.

Today, our conversations with customers are centered on the topic of how technology is transforming every aspect of their business and the markets they compete in.

They see that technology is no longer a supporting player, but is actually the driving force behind business strategy and business transformation.

We’re entering a fundamentally different phase in the Internet era.

Neither e-commerce nor e-business changes the fundamental structure of the business so that it can react to changes and opportunities in Internet time.

That’s where our e-services strategy comes in.

With e-services you think of your business as a set of independent services – email, accounting, inventory management, or HR -- that you enlist and pay for when you need them … not as business functions with expensive application infrastructures that you must support and maintain.

With e-services, you can reach your customers wherever they are – even when they’re on the move – because anything with a chip in it becomes a platform for the delivery of services.

In an e-services world, all things become revenue opportunities. Capital assets. Material assets. A key competency. Know-how. Experience. A world-class process. They all can be delivered as a service over the Net to generate new revenue.

HP’s mission is to invent useful customer solutions at the intersection of e-services, information appliances, and an always-on Internet infrastructure.

We believe the real promise of transformation for this era lies in understanding the linkages … the connections … the intersection … of these three forces.

It is by understanding the interplay between them – that we have the opportunity to use technology to fundamentally transform the customer experience … to transform the value creation process … and, in the process, even transform entire industries.

The linkage between business transformation and IT implementation is becoming inextricable … and this places new demands on Internet infrastructure providers.

As we look out into that world … the new demands it places on companies … and the next-generation of technology required to make it possible … we’ve developed a set of beliefs, a set of basic tenets, that guide our systems strategy.

Belief # 1 …

Solutions must be engineered for the rigors of relentless always-on Internet environments …

Always-On Internet Infrastructure is quite simply a requirement of digital life. Downtime costs real money.

E-Bay reportedly lost $5 million from two outages that took their service offline for 30 hours.

MCI WorldCom had to offer 20 days of free service to compensate 3,000 business customers affected by disruptions in its data network service.

And, according to a June report from Lloyd’s of London … firms lost $20 billion in 1999 because of computer outages and hackers.

And when your IT strategy is your business strategy, your entire valuation as a company can be dependent on the performance of your systems.

E-Bay’s stock fell 25% during the time of its reported outages.

And as technology becomes even more mainstream in industries like healthcare, the stakes get even higher.

It takes years of experience driving five:nines levels of performance into your systems … years of inventing at the edge … years of experience managing complex customer environments … to get it right.

So, here’s what we mean when we talk about Always-On Internet Infrastructure … and this is important because its sets a very high standard– one that very few, if any, vendors can match.

It includes a combination of:

  • The best front-end planning, design, configuration and performance tuning services.
  • Best-in-class hardware and software solutions … including our networked storage solutions and our integrated software offerings for managing and securing systems and networks.
  • It acknowledges the fact that customers have discrete needs within their computing environments, needs that require different computing platforms … therefore NT, HP-UX and Linux, all receive mission-critical levels of support.
  • And finally, when we deliver Always-On solutions it includes world-class experience in monitoring, managing and supporting customer environments.

I would encourage you to visit the HP booth to see our server, storage, networking and management solutions … all fundamental building blocks for Always-On Internet infrastructure …

Belief #2 …

Open systems are the best way to help this new universe evolve to its fullest …

Technology is changing so fast, that to bet a business on proprietary technology … or on a single technology … commits an IT environment to becoming a legacy environment.

Frankly, we don’t believe the technology that enables business ecosystems to flourish can be pre-determined – openness is key to flexibility in this new dynamic market.

So in a world characterized by rapid technology advances, intense competition, and dynamic markets … the only way to help our customers avoid paralysis is to provide flexibility … to embrace, support and promote open, industry standards-based technologies and platforms. Period.

Now, belief number 3.

Our systems must anticipate and embrace the key computing and technology shifts ahead.

Next generation infrastructure has been at the heart of HP’s vision and strategy for over 20 years.

Long before the Internet became mainstream, HP was describing the shift toward pervasive computing— a world where information systems were so pervasive, so ubiquitous … so invisible that they are part of everyday life for most people … and so natural and reliable to use they operate like information utilities, paid for by usage, servicing a world of persistently communicating information appliances.

In the early 80’s, we bet our company on the tenets of this new world:

    • Open systems
    • Unix
    • Scalable architectures … specifically RISC

We mobilized the company to capitalize on these opportunities. And today HP is indeed recognized as the champion of open systems, a leader in Unix and one of the inventors of RISC technology.

The point is … we have some experience at predicting and leading key technology shifts.

So, here’s what we believe to be the next key technology shifts … and we’re embracing them as part of our systems strategy …

The first is the shift to IA-64.

We believe IA-64 will become the scaleable processing architecture for the Internet age.

The long-term performance and scalability of IA-64 is essential to supporting millions of devices generating billions of transactions.

IA-64 is crafted for dynamic Internet-based interactions and transactions, optimized for security-based computations, and designed for rich media processing and object-oriented environments.

And, in keeping with our belief in industry-standard components, IA-64 will actually promote computing harmony ... by standardizing multiple applications and operating systems on a single, industry standard hardware platform. This standardization will eventually mean more choice and lower costs for customers as they deploy their computing infrastructure.

You may already know this, but it’s worth repeating, that HP’s EPIC technology -- Explicitly Parallel Instruction Computing – is the foundation of Intel’s IA-64 architecture.

This gives us a huge competitive advantage in the areas of compatibility, technology and time-to-market as this new platform comes of age.

While we clearly think IA-64 is important … big architectural shifts like this one take time. We’re very pragmatic about this, which is why we continue to invest in building a strong roadmap for our industry leading PA-RISC architecture.

Our next generation PA-RISC platform, the PA-8700, which is due out in volume in 2001, is faster than any competing architecture in the industry. And development plans are already in place for the PA-8800 and the PA-8900 processor so that we can continue to provide our customers with a world-class growth path on the RISC platform.

The bottom line is we believe in the shift to "explicitly parallel computing" that’s embodied in IA-64 … but we’re not compromising an inch on our commitment to the RISC architecture. It’s essential that our customers – and HP – remain competitive on the volume platforms of the day.

The second shift we see is the shift to open source.

In our view, open source is inevitable and natural.

And while, in some quarters, the debate rages as to whether or not open source software is ready for prime-time, mission-critical computing ... the fact remains that open source development initiatives, Linux being a prime example, are by all measures extremely successful and mainstream.

At HP, we saw the important benefits of the open source model early on – the reduction in software development costs, accelerated time-to-market, the creation and provision of high quality code and the ability to customize code to address unique requirements.

Most importantly, we recognize that Open Source is at its core – OPEN – which, as I mentioned earlier, we believe is absolutely essential to offering customers the best IT solutions, and the most flexibility for the future.

As a result, HP is already at the heart of supporting key open source technologies and initiatives … let me run through a few of them:

  • Of course, Linux will be supported across HP’s systems, software, and services
  • In fact, we’re porting Linux to PA-RISC to ensure customers have access to Linux-based software applications on the world’s best hardware platform
  • HP is a founding member of the IA-64 Linux Project -- an industry consortium focused on porting Linux to IA-64

While Linux is a shining example of the power of the open source movement … it goes far beyond Linux … and it certainly does not mean the extinction of other operating systems.

As I said earlier, different operating systems are beginning to support different application requirements. We believe NT, HP-UX and Linux are all important and we remain firmly committed to supporting all three on their existing chip architectures as well as on IA-64.

We’re also making investments in open source initiatives like our work with "sourceXchange" – a web-based service that expedites software development collaboration between corporations and developers.

And I must mention e-speak – an HP open source initiative developed in HP Labs – aimed at creating a platform for the development of e-services.

I’ll talk more about e-speak in just a minute.

These technology shifts are components of what we see as the next major architectural shift in computing … the shift to services-based computing.

We’ve been through the mainframe and client/server computing eras. And now we’re in the Internet server-computing era. The next major architectural shift, the new center of gravity for computing advances will be, and to some extent already is, in the area of services-based computing.

Some people are calling this "XML-based computing" … others call it "federated" or "collaborative computing." Others are calling it "peer-to-peer" computing … although we think peer-to-peer is just a precursor of what’s ahead.

As I said at the outset of this speech, HP put a stake in the ground around service-centric computing – our e-services vision – more than 18 months ago.

In this new model of computing … networked devices, resources and services can be brought together, connected, and harnessed dynamically to create solutions, perform tasks, solve problems ... and then be disconnected, when no longer required.

Services-based computing architectures will loosely couple together everything from technology resources … like processor cycles, storage, I/O, memory and devices … to business and consumer services … like restaurant reservations, transportation services, or financial services.

The modularity of e-services opens up the transaction architecture of the Net – to make business more flexible, more fluid. This is when the capabilities of the Net shift from "do-it-yourself" to "do-it-for-me."

We will see these connected services and applications in many different environments.

Consider the mobile environment – every time you show up in a new city a whole new set of location-specific services … services that you have expressed an interest in … will make themselves available to you and your mobile device.

Mobile e-services relevant to Atlanta are what you want when you’re here … but when you’re in New York, you may want e-services that point you to the best new restaurant in mid-town, for example. This is what services-based computing is about.

Or what about at work? When hundreds of ordinary desktop computers can be coupled together on a regular basis … maybe every night … to make their excess capacity available as a service to create a virtual supercomputer for demanding engineering and design tasks. This is what services-based computing is about.

Will traditional Internet infrastructure like servers and storage play a role in this new world? Absolutely. More than ever. With every architectural shift the demand for infrastructure increases.

But true services-based computing requires capabilities and technologies beyond today’s Internet server-based computing model… like security approaches that enable truly safe interactions between anonymous devices and systems … or the ability for Internet resources and services to advertise and locate one another to complete a task or a transaction … or the ability to manage multiple interactions between services simultaneously.

This is the era when e-speak comes of age … because e-speak is central to delivering on this services-based model of computing.

E-speak … today … enables the automated discovery AND interaction between web services. It actually delivers capabilities significantly beyond those that generated so much hype in the recent Universal Description, Discovery and Integration standard announced by Microsoft, IBM and Ariba. And e-speak is open source!

We believe that a vendor-neutral, totally open, industry standards-based approach must be applied to the new technologies and standards that are emerging to enable this next generation of computing. Which is why we’re judiciously evaluating the proposal made by the UDDI consortium.

Stay tuned for more details from HP in this space.

Over the past couple of weeks, if you’ve been following HP, you may have noticed some of the announcements we’ve made related to this systems strategy.

Let me spend a couple of minutes putting recent events in context for you.

On September 11, we confirmed we’re in discussions with PwC to acquire their management consulting services practice, which would significantly accelerate our move into the IT consulting business.

This is consistent with our belief that the days of talking to one company about business strategy and another company about technology implementation are, frankly, over.

As I mentioned before … the linkage between business transformation and IT implementation is inextricable and our conversations with customers are evidence of these changes.

We validated our views in a recent study that we commissioned.

We asked Boston Consulting Group to conduct a blind survey of more than 100 CIOs around the world.

Here’s what the study confirmed:

  • CIOs are, in fact, looking for consulting and technology partners who are experienced at working together.
  • While CIOs once valued neutrality regarding technology implementation, today they value a point-of-view on how and what technology can speed business transformation. A point of view that keeps the client’s best interest in the center of the engagement.
  • And time-to-solution … time to revenue … the speed of implementation … matters. That’s why they value the linkages between consultants and technology players.

And that’s why you’re seeing a sea change in how systems vendors and consulting practices go to market.

While we’ve been growing our consulting business organically through aggressive hiring and strategic partnerships – and we’ve made great strides in doing so – we believe the best way to accelerate our growth to address this market shift is through an acquisition of a premier consultancy.

Fundamentally, this acquisition is about combining world–class technology solutions with world-class consulting services to help customers transform their business.

Now, let’s shift the conversation to Superdome.

On September 12, we launched the latest addition to our Unix server line-up, Superdome, our new high-end server … that combines world-class technology with world-class service, support, and financing. In fact, Superdome represents an entirely new approach to delivering value in this market … so different … that we believe it changes the rules of the game.

Superdome is strategic to HP for a number of reasons:

First … with Superdome we’re now delivering the industry’s most powerful Unix server line-up … top to bottom … bar none.

Second … Superdome represents a radically different approach to working with customers AND leveraging ALL of hp’s resources to develop total solutions.

Third … With Superdome we’re introducing a completely new go-to-market, pricing and implementation process for customers. In fact, we’re raising the bar on what it means to be a leader in the high-end Unix market.

We’re providing up-front planning and integration services to assure customers this is the right system for their business and it will easily slip into their existing IT environments when it’s installed. Or we won’t ship it.

We’re delivering a utility-based pricing model where customers pay for the server capacity they need … exactly what they need, when they need it – just like they pay for electricity or phone services.

We’re automatically assigning a dedicated support team the moment the customer makes a purchase ... to support and monitor the system. In other words, you’re not just buying a server, you’re buying a service and support team along with it.

And finally, Superdome is engineered to support the key computing and technology shifts that lie ahead … things like IA-64 and multiple operating systems such as Unix, NT and Linux … providing customers with the ultimate flexibility and investment protection for the future.

Superdome is more than just world-class technology it’s a world-class customer experience.

So, we’ve talked about how the technology landscape is shifting.

We’ve talked about the new business imperatives.

We’ve talked about HP’s strategies for helping customers transform their businesses.

As you explore and discuss new technologies over the next few days at this conference … keep in mind that a new game is emerging … it’s a different game … and the rules of competition are changing.

Almost a year ago … I stood in front of the HP garage … the birthplace of Silicon Valley … and I asked the world to WATCH this company.

This is a very good time to stay tuned.

Thank you. Enjoy the conference.

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