HP: The Adaptive Enterprise that can't adapt
SAP hardly to blame
Opinion For quite some time now, HP has been hawking its Adaptive Enterprise idea to anyone that would listen. The basic concept being that companies need to use technology as a tool for making quick, fluid changes in their businesses. But after HP blamed a disastrous SAP roll-out for its third quarter failings, you have to wonder exactly how adaptive HP's own enterprise really is.
In brief, HP's server and storage division yesterday reported a loss of $208m. Three executives were fired as a result of the loss, and HP's shares shed close to 15 percent of their value on the news. All in all, a pretty bad day.
Now much of HP's hardware woes were due to an EMC pounding. In its most recent quarter, EMC grew hardware revenue by 33 percent year-over-year and partner Dell enjoyed 60 percent storage growth. HP admitted that its storage business did not perform up to snuff in the last three months and that much revenue was lost.
Oddly, however, HP seemed to place more blame for the weak third quarter on an SAP implementation. The company struggled to get new SAP supply-chain software up and running with the process taking six weeks instead of the predicted three. HP's ordering system became chaotic. HP had to tap the channel to make sure deliveries were met and even missed some sales. "The migration was more disruptive than we'd anticipated," Fiorina said. All told, HP's hardware and software failings cost it $400m in revenue and $275m in operating profit in Q3.
On one hand, you have to believe the SAP problem did have a material impact. HP and SAP work together on numerous large revenue deals. One would think this relationship would prevent HP from outing SAP publicly as a culprit unless it really had no where else to turn.
Conversely, you have to peg the SAP gig for the red herring it is.
If it's true that an SAP rollout caused HP enough grief to merit a public skewering, then the company is in more trouble than many people think. HP has based its entire corporate strategy around the Adaptive Enterprise notion - something meant to be better than IBM's On-Demand Computing schtick and meant to slove exactly these types of software problems.
HP claims to be the leader in walking customers through difficult technology rollouts. It specializes in making complex software work on the cheapest hardware possible and in having a top-class services organization to sort any problems out. HP can help customers change their data centers in an instant to deal, for example, with unexpected spikes in transaction processing demands or sudden failures in an ordering system.
"The HP Adaptive Enterprise vision leverages IT to not only support change but to embrace and assert change," HP says. "It's about driving business strategy and business processes into the underlying applications and infrastructure to fuel business success."
Wouldn't you know, HP even has an Adaptive Enterprise "solution" specifically designed for complex SAP supply-chain software rollouts.
How tempting does this "solution" look though, if you consider that HP can't even get SAP software up and running within HP. The promise of moving quickly to help businesses adjust to gwana-gwana . . . appears less tenable than HP would have you believe. Hell, HP cost itself $400m in revenue by not being adaptive. Few companies can afford losses on that scale.
Is this really what HP wants customers and investors to focus on? A bad trip with SAP? Wouldn't it be more responsible to confess to a longer term slide at the company that needs correcting?