Speeches

© Copyright 2002 Hewlett-Packard Development Company, L.P
All rights reserved. Do not use without written permission from HP.

Thank you and good morning. This is the fourth time I've had the pleasure of addressing this conference in one form or another, and every year, I've told you that I feel lucky because I work for one of the greatest companies in the world. I am delighted to be here today to talk to you about the new HP, which is now more than ever one of the greatest companies in the world.

With nearly one billion customers in more than 160 countries around the world, we've spent the past year working hard to give new meaning to the term "HP World."

We now have more than 140,000 people across the globe working with you day in and day out to solve your toughest technology challenges and open new avenues to business success. From what I've seen of the HP World schedule, it looks like half of them will be speaking to you here this week.

But I wanted to come here, first and foremost, to say thank you. You know, it's a fact not lost on any one of us that the longest-running information technology conference in North America is a conference of HP customers.

In part, that's a tribute to the vision and leadership of our hosts today, and I want to thank Interex for 28 great years of partnership.

Many of you have come here this week because you want to find ways to integrate new web-based technologies and processes that you spent so much time and money putting in place in the 90s. Or, you want more help in addressing the issues of manageability and interoperability. Or, you wonder whether it's possible to get more out of your existing technology assets. Or, you wonder what it would be like if you only had to pay for the computer resources you actually use. Or, maybe you're here because you want to know how HP sees the road ahead.

I'll get to all of that in a moment. But let me say from the start that even as I introduce you to the powerful capabilities of the new HP, we know that great organizations are defined not just by their capabilities, but by their character—by the company they are, and by the company they keep.

We've spent more than six decades working hard to earn your trust, to be a good partner and a good employer, to build relationships that span across generations of technology. I want you to know that at the new HP, just like at the old HP, everything we are about and everything we do starts with customers. We know that nothing happens unless you are willing to buy something from us and unless you're willing to do it again and again. We never forget who keeps us in business.

At the new HP, our sights are set squarely on the future—our customers' future. But there is one story from our past—about Dave Packard—that informs our future here today.

At the very first job he ever worked, at General Electric, Dave was given a difficult task. He was told to get a batch of mercury-vapor tubes successfully produced. Every single previous batch had failed. To find out why, he decided to leave his office and spend all his time on the factory floor. He worked long hours, and talked to all the workers responsible for making the batch. He discovered that the written instructions from the engineers weren't sufficient to do the job right. So, he worked hand-in-hand with the people on the floor to come up with a new set of instructions—and for first time, the batch got made without a single problem.

Later, he brought a very important lesson from that experience to HP: Try harder than everybody else to solve the tough problems. Always go the extra mile.

That's the pledge I make to all of you today: All of our capabilities aside, the new HP will continue to be the company you can count on. The company that understands that relationships are as important as technology and that character matters as much as capability. The company that remains passionate about finding solutions to the unique challenges that you face. The company that goes the extra mile.

It's been said that the very nature of technology is the nature of change. Many of you have been with HP through all four waves of change that have swept the computing landscape in its short history.

From custom vertically integrated centralized computing, through departmental and work group resources, right up to the distributed networked world that is now going mobile—or, if you prefer to call it, the shift from mainframes to minis to client-server networks to the Internet—change has been the name of the game. But there has never been a time when the demands placed on information technology—and the demands placed on all of you, as IT professionals—are as great as they are today.

We live in an age when it is impossible for any business to consistently predict what's coming around the corner, short or long term. It's not enough to simply be prepared to change—companies today have to move at the speed of change. And as your business is required to adapt to change, your metrics as IT leaders change. You're no longer rewarded for stability, you're rewarded for agility. You have to shift from defense to offense. You have to be able to adapt your infrastructures more rapidly and deploy systems and applications in near real time. We'll hear HP's Ann Livermore and Peter Blackmore talk more about this later today.

It means you're no longer just defending your goal line. You're now charged with making up plays and moving the ball downfield against a shifting, blitzing, lightning-fast opponent, with two minutes to play. It means that if you're an information manager, you have to think about the creation of content on one hand and then the management, the distribution, the networking, the manipulation, the mining and, ultimately, the transformation of that content into whatever form you choose. Information technology is the ultimate team sport. The challenge is many of you are trying to win the game with a quarterback—a system that saw its best days five years ago.

The old conventional wisdom of "never touch a running system" was effective when processes remained stable over long periods of time, but in today's environment, none of you have that luxury. Problem is, many current IT infrastructures were built to be stable, not to react quickly—which is one of the reasons why a survey of key technology decision-makers in the United States found that the business environment is changing seven times as fast as the underlying IT applications.

So, your staff ends up spending 40 percent of its time simply finding stop-gap fixes to outmoded solutions that can't keep up with yesterday's demand's, let alone today's. Or worse, you may have invested millions in a new system that doesn't necessarily talk to the old system, which means that half a decade's worth of critical data is in one system and there's no easy way to transfer it to a new one.

And yet, business cycles and business budgets no longer support specialized or custom-built hardware and software to meet business computing needs. So all the while, you're being pressed to do more with less.

And the real trick of it is, we haven't even begun to see where this latest technology revolution is going to take us. Because the real transformation we see happening in technology today is that physical processes are becoming digital processes. We've gone through this phase of the Internet where we thought everything was e-business, where the ability to purchase or place orders over the Web was a big deal.

But the true inflection point of this industry is what happens when we start to digitize everything—from the Library of Congress to the great works of the Vatican to your customer brochure. That is when this industry will change forever.

Just stop and think about the changes being wrought today by digital photography, which is the embodiment of the transformation of a physical process into a digital process. What do you do when you use a traditional camera? You take a picture, something happens on film, you physically take film someplace else, they develop it through a physical, chemical process, and then you end up with prints that you physically distribute or mail. It's a fairly static process. It doesn't allow you to do very much.

But digital photography transforms that into a digital process. You create content. You network it. You manipulate it. You distribute it, you change it and you store it. And, ultimately, when you're ready, you transform it into digital content—and you haven't even stepped away from your desk or outside of the house.

That same process transformation is what is going to happen next in enterprise after enterprise after enterprise. Just think about this: Into a business environment already changing at seven times the rate of underlying IT applications, over the next three years, there will be more data created—more data that needs to be mined, analyzed, understood, stored, networked, distributed, made useful and made into information—than in the entire history of mankind.

Over and over again, many of our customers tell me they want partners who can help put these ingredients together. They want end-to-end technology solutions, not independent isolated servers or storage boxes. They want real answers, not simply the latest killer app or the newest hot box. They want fewer strategic partners who can do more for them. They want somebody they can trust.

It makes perfect sense. If you're building a house, you can go out and hire your own painter, and plumber, and electrician, and carpenter, and roofer, and stonemason—and sign separate contracts with all of them. You can hire people to lay the carpet and set the tile. You can go out and buy all the materials by yourself, and then try to put them all together. But at the end of the day, isn't it better to work with one builder that you trust, who sees the complete picture, who understands that they are not just building a wall or a roof or a driveway—they are building a house. You want them to bring with them the best partners—the best painters and electricians, the best players, the best ingredients, but you want someone who can translate your vision for what you want into reality.

To us, this is the essence of a strategic partnership, the understanding of those processes and the application of a complete set of solutions and technologies. The reality of what we are seeing in the industry today is that there are fewer and fewer players who have the capability to add that value in new ways along with the resources to continue to invent and invest in the technologies of the future.

Which brings me to our merger with Compaq. Why did we make what was at the time a very controversial announcement, that we were actually going to attempt the largest merger in the history of the IT industry? Because we saw these trends, and we saw the opportunity to combine these two companies to create one great technology company, to improve our systems delivery capability to help you do what you want to do.

And now, the industry consolidation that we talked about a year ago is happening, and will continue to happen. The fact is, every industry goes through a phase of maturation where consolidation becomes the dominant force. It's the natural evolution of industries. Now it's the IT industry's turn. We felt it was important to move early, to move decisively and give ourselves the opportunity to integrate these companies while the economy and spending on new IT projects is slow.

And frankly, we think other competitors now are beginning to react to us and starting to make their own strategic choices. Think about Sun's about-face on Linux, going so far as to offer Linux on PCs so they can offer end-to-end solutions. Or think about Dell's decision to upend its business model in search of new growth opportunities in printers, services and whitebox PCs. Suddenly, it seems like a good thing to be in imaging and printing and personal computers and enterprise systems and professional services—to be an end-to-end solutions provider. I'll simply assert that it's a hard shift to make without technology and R&D assets and a service and support army, but our competitors are beginning to make those decisions. Meanwhile IBM is returning to the completely vertically integrated strategy of the 80s. So you can't have it your way, you must have it IBM's way. We think we have an advantage over all three players. We think the market is moving to our strengths.

By merging with Compaq we significantly strengthened our portfolio, but we also created a stronger operating model—a more balanced revenue and operating profit mix. I don't need to tell you why strength and stability and real cash flow and a strong balance sheet and the ability to invest over $4 billion a year in R&D are important in times like these and important in an IT partner.

Let me tell you a little bit about who you are partnered with today. The new HP today powers more than 100 stock and commodity exchanges, including 14 of the world's largest. We support 95 percent of the world's securities transactions and handle 45 percent of the platform market running SAP and i2 applications. We do two out of every three credit card transactions worldwide and three out of every four electronic fund transfers. We handle 80 percent of all telecom billing and customer care traffic in Europe and Asia. We help control 65 percent of the world's energy infrastructure and are the leading platform for High-Performance Technical Computing. We are the leading consumer technology company in the world, the leading small and medium business technology company in the world, and one of the leading enterprise technology companies in the world.

We're also the No. 1 partner for Microsoft, Intel, PeopleSoft, BEA, Accenture, Oracle, Siebel, KPMG, CGE&Y and many others. In other words, no other company is in a better position to help you design, build, integrate, manage and evolve your business infrastructure than HP. Here's where scale actually does matter. Being the No. 1 partner to all of these guys makes us a better partner for all of you—we have the scale to offer end-to-end solutions in a more comprehensive way than we ever could before.

From the beginning, on the day we launched, we knew we needed to address the question of strategy and direction for every one of our products. Which is why, on day one, we had three-year roadmaps in place and began communicating them to you. I know product roadmaps and migration paths are an important—even emotional—subject for many of you in this audience. Let me repeat what I said last year: we have never stranded our customers on legacy technology. We have always provided a migration path to the future and to new business benefits. That has been our hallmark in the systems business, and it will continue to be our hallmark in the systems business.

Now, let me run for a minute through a few roadmaps, which you will hear in more detail in the breakout sessions over the next few days.

By merging with Compaq, we've significantly strengthened our position in the high-end fault-tolerant computing with our NonStop servers. That's important because NonStop systems are at the center of some of the most data-intensive real-time applications in the world, whether those are national security or the New York Stock Exchange.

We're also working to combine HP's market leading position in UNIX with clustering capabilities of pre-merger Compaq's coveted True 64 UNIX.

And in the world of industry standard servers, we now have the industry's leading Intel server franchise.

If we're going to provide the kind of solutions and have the kind of staying power our customers demand, we think it's important to be leaders across the server market, from the low end to the high end, because virtually all of you have both. That is the reality of your computing environment and your business needs.

And of course, prior to our merger, HP and Compaq had independently announced plans to standardize on Intel's Itanium processor family across our server platforms. In July, we announced a worldwide rollout of an extensive portfolio of Intel Itanium 2-based systems, integrated solutions and comprehensive services.

The performance and cost advantage of high-volume commodity components and emerging standards-based software have become too compelling to resist. That's one of the reasons we began working with Intel six years ago to co-develop the Itanium processor family. Now, every major hardware vendor, with the notable exception of Sun, and most of the major software players are planning significant work on this new chipset. Among other things, we believe this gives us an advantage over IBM, which has chosen to continue to invest in their own, proprietary chipset.

We also intend to differentiate by being the best platforms for the deployment of the new generation of web-based applications and services. Because you want freedom of choice, we intend to leverage both the Microsoft .NET and the J2EE web services software architectures and frameworks in the places where they make the most sense for you.

And we continue to make good on that promise this week. We've recently strengthened our relationship with BEA and J2EE. I am pleased to tell you that in response to the overwhelming customer demand for .NET solutions, Microsoft and HP announced this week that we are launching a new initiative to align and focus our enterprise technologies, sales and services to more rapidly deliver integrated, end-to-end .NET solutions to large businesses worldwide. This new initiative represents a total investment of more than $50 million from both companies, and will create one of the world's largest, most specialized forces of .NET consultants and systems architects—combined with the broadest choice of technology platforms—in the industry. All told, more than 5,000 HP sales professionals will be trained on .NET, more than 3,000 HP Services professionals will be certified on .NET, and a new group of HP .NET solution architects will be formed.

This announcement represents the first major sales and services commitment to .NET web services solutions from a leading global technology company and builds on our already-strong relationship with Microsoft in the marketplace. We believe it is going to enable us to bring you high-value solutions quickly and with minimal risk, with an unprecedented return on investment, and we want to thank Microsoft for what we hope is the first of many industry-changing announcements with HP.

In storage, we've taken pre-merger Compaq's very strong mid-range StorageWorks product line and added that to pre-merger HP's leading high-end storage array systems to create a very powerful storage offering, the industry's best storage lineup.

Both companies had invested heavily in storage management and virtualization software for distributed and centralized storage systems.

And, of course, in the area of personal systems, we've merged two product lines. In business desktops, we're leading with Compaq's Evo product line. On business notebooks, same strategy. In consumer PCs, where we have strong products on both sides, we're offering both the Compaq Presario and HP Pavilion, but with differentiated value propositions: the HP brand will differentiate with new features and capabilities, meanwhile, the Compaq brand will compete on price.

Now, I go through all that to illustrate that we have clearly improved the individual ingredients of our portfolio. With these assets we are uniquely capable of architecting enterprise infrastructure. But equally importantly, we've greatly strengthened our solutions delivery capability. By joining forces, we've doubled our service and support capacity in the area of mission-critical infrastructure design and we are the leading provider of multi-vendor support and outsourcing.

With 65,000 IT support and operations professionals working at our customers' disposal in 160 countries around the world, HP Services is now one of just a few companies that can span as deep and wide as your business does—anywhere and everywhere in the world. As the economic downturn—combined with rapid change in the market—encourages more customers to turn to outside providers to manage their infrastructure environments—to both lower cost and reduce IT complexity—we believe we are in a unique position to offer managed services that meet those needs. Why? Because we believe we have built the deepest expertise in IT infrastructure. I'll talk about this more in a moment.

So, that's how the new HP began. Today, we're a little more than four months old. Of course, we've now completed our first quarter as the new HP. I'm proud to say that so far we have hit all of our integration milestones and targets. We thought it was important, when we launched the company on May 7, that we had our account teams in place for our top customers and ready to answer your questions; that we had transition plans for every product the two pre-merger companies sold; that we had our web sites integrated; that we had our customer support people trained; that we had all of our internal e-mail and voice mail systems integrated so that our employees could communicate and collaborate with one another on day one.

All of that was accomplished on day one of the new company. And now that we're four months along, as I said, we continue to meet all of our integration milestones and attract new business. At our earnings call last month, I was proud to announce that the top 48 contracts that we landed in the first 90 days alone totaled more than $2 billion in incremental revenue. As our customer base grows, our platforms become an even bigger draw for application developers and partners.

So, where do we go from here?

After more than two decades and billions of dollars of industry investment aimed at improving speeds and feeds and performance boosts, we think it's time to direct those investments toward making systems work better together.

I'm talking about making it easier to manage all of the disparate systems and applications this industry has helped to create. I'm talking about making it easier to integrate systems and data and business processes and the new generation of web-based services that are replacing applications. I'm talking about improving the utilization of system resources by being able to manage and reallocate resources on demand. I'm talking about committing to standards-based components and architectures to give our customers more flexibility, the agility to adapt to change.

It's time to simplify. We can't expect you to invest in new technology—like mobility, web services or multimedia applications—until we make sense of what already exists.

At the new HP, we're focusing our energy on reducing the cost and complexity of infrastructure. We are going to aim our collective resources and talent at reinventing the IT value proposition for our customers. We will stake our claim on being the company that offers the best return on IT.

On the manageability front, it means we are going to be getting deeper into automated, cross-platform enterprise systems management through greater investments in HP OpenView. As you know all too well, manageability is the biggest pain point for most IT executives. If you can't manage your information assets in an integrated way, you can't make them more efficient.

Our OpenView offering is already far ahead of the market in terms of being able to manage every aspect of your operations from specific infrastructure components to entire systems to monitoring the performance of business applications and processes across UNIX, Windows, Linux, even Solaris server platforms and storage from HP, Hitachi, IBM and EDS.

As I mentioned a few minutes ago, in the area of improved resource utilization, we are going to move much more aggressively into utility computing, because we believe it is the future of this industry.

Our competitors are just beginning to talk about this new computing model, but if you look back at the record, our people have been talking about the concept of utility-based computing for more than two decades—and it shows in our initiatives to date.

Not long ago, Gartner compared HP's Utility Data Center to IBM's eLiza Initiative. Gartner found that while eLiza was a good vision of the future, HP, and I quote, "was the first to market with a product that delivers basic data center virtualization . … Unlike IBM, HP found an established solution, improved it, bundled it with its own hardware, software and services, and delivered value very quickly."

Over the past year, outsourcing, or what we call managed services, has been one of the fastest-growing segments of HP's business. And we see even greater opportunities to serve customers through a new generation of managed services, where everything from applications to compute power to storage—every aspect of infrastructure can be provisioned and paid for on a pay-for-use basis across the Net.

It's just common sense—instead of paying full price to use half the capacity of your system—with all the headaches and challenges that go with it—why not let HP work with you to manage this technology, so it will always be up-to-date, always have the latest and greatest applications, and be provisioned into your organizations to be used only as you need it.

Now I should quickly add that we are not talking about a value proposition where you turn the keys to your kingdom over to us and we check back with you in a few years to see how the contract is going. That is the old model of outsourcing, and it can't meet your needs anymore. What we are talking about is partnering with you to understand how we can use outsourcing, specifically managed services, to help you accelerate business process transformation. It is a partnership, a true collaboration.

Just last week, we signed a $1.5 billion agreement with the Canadian Imperial Bank of Commerce—one of North America's leading financial institutions—to provide comprehensive IT services over the next seven years. Under the agreement, HP will manage a significant percentage of CIBC's bank infrastructure, from desktop PCs to mission-critical data centers to software from multiple vendors, including MVS and NonStop systems, UNIX, Windows NT and IBM AS/400 midrange servers. This deal is an ideal example of the kinds of things we couldn't do before that we can do now—and we believe it's a sign of things to come.

On the issue of improved flexibility and less cost, we will continue to be the industry leader in standard components like Linux at the operating system level and Itanium at the processor level.

The Linux movement in particular is based on openness, on the idea (and the evidence) that the achievement of our collective work is greater than the sum of individual efforts. That everyone benefits when everyone else advances. That you know your needs best—and you do not find a way to fit your needs into an existing system, but have the freedom to build a system to fit your needs.

The truly wonderful thing about the open-source movement is that it requires an ongoing exchange of ideas between consumers and producers. We believe it provides customers with more flexibility, which is why we believe Linux is the right choice in particular application environments—especially web and infrastructure services, as well as e-commerce application development, digital content creation and the emerging server appliances market. We will continue working to drive Linux adoption in enterprise environments with partners like SAP and Oracle and with the broadest set of Linux-based service and support offerings.

Finally, on the issue of interoperability, as just one example of our commitment, two weeks ago, we signed an agreement with Hitachi to swap APIs on big arrays and storage software.

The exchange will enable HP to manage Hitachi's high and mid-range storage arrays within the HP OpenView Storage Area Management software suite. In turn, Hitachi will be able to manage our StorageWorks offering within the Hitachi HiCommand Management software suite.

This comes on the heels of two other agreements we've signed the past few months to exchange APIs with both EMC and IBM on their high-end storage arrays and management software.

Taken as a whole, this API-swapping trifecta—as it's been called—will give us the ability to manage 90 percent of the world's storage infrastructure. It's our hope that the knowledge we gain through integrating API technologies from Hitachi and other companies into a common software management platform will be used to assist the entire industry in making the long-awaited Bluefin Common Information Model standard—hopefully by year's end. We think this is a bold step, and we hope others follow in our footsteps.

So, I've covered a lot of ground here. But taken as a whole, what I'm saying is this is no longer a world driven solely by the development of technology. This is a world increasingly driven by the effective utilization of technology. Put another way, technology is not an end in itself. Technology is a means to an end. And that end is defined by you, expressed by your objectives. HP's job is to make sure we meet your objectives, serve your needs, with our products, our people, with our partners.

In this market, you are free to shop for the solutions you want and need. We know that you are going to seek out partners, collaborators and companies that can deliver what you want, because your business depends on it. Ultimately, this means that you no longer have to find a way to fit your needs into an existing or propriety computing system.

Which means that virtually every technology company is going to be forced to rethink how and where they add value, how they differentiate themselves. At HP we knew we could either lead this trend or be swallowed by it, so we made our choice.

Today, we are in a much better position to serve you than we were a year ago at this conference. Today, we are a market leader in all the essential components of information infrastructure, servers, storage, management software, imaging and printing, personal systems and mobile devices. Make no mistake about it: We will lead.

And in doing so, our promise to our customers is that we will provide you with better flexibility, better interoperability, better reliability, better manageability, better utilization and lower cost of ownership. We will be the company that reinvents the IT value proposition—and we will go the extra mile to serve you.

That is where we find ourselves at the beginning of a new century, with a new HP. It's been written that at the beginning of another century, the 19th century, people thought nothing was possible. But at the end of a century that witnessed inventions like the locomotive, the telegraph, the steamship, and the electric light bulb—a century where man walked on the moon and set up a laboratory in space—all immense leaps, not only in commerce and transportation, but in human ingenuity—people believed that anything was possible.

That's where we are today. The strides we've made in the past decade are nothing compared to the strides we will make in the decade ahead. I have never been so confident of HP's future. Today, we really do believe that with your vision and our technology and capability, everything is possible.

Enjoy the conference everyone. Find the answers you need to all those hard questions you have. Again, thank you for your business and for your support.

Thank you.

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