Original URL: http://www.theregister.co.uk/2009/03/10/hp_downturn_sales_pitch/

HP sweet talks the hand that feeds IT

Now is the time to spend (on us)

By Timothy Prickett Morgan

Posted in Servers, 10th March 2009 05:56 GMT

These days, no IT vendor seems to be capable of doing a plain, old-fashioned product launch. And now, with Hewlett-Packard owning Electronic Data Systems and giving IBM a run for the product and services money in the data centers of the world, it seems like everything has to have a services angle.

Hardware gets cheaper and cheaper every year thanks to Moore's Law, but HP, IBM, and hundreds of other key suppliers of IT are thankful that people are not transistors. People get more expensive every year (until you outsource them, but the process soon resumes), and they think up clever ways of solving IT problems that companies will pay hard-earned cash for.

So it is with HP's Technology Solutions Group behemoth, which is taking a multi-prong approach in trying to convince IT shops that now is the time to do an IT makeover. You should start building now, HP is saying, for the economic recovery that will inevitably come.

HP's top brass are assuming the worst for 2009. They say that the rest of the year will be as tough as the fiscal first quarter ended in January - hence the cost cutting and wage cuts on top of EDS-inspired layoffs at HP. But the company's sales pitch to customers today is that this is the perfect time to do IT projects.

"It is very, very challenging for customers," admits Deborah Nelson, senior vice president for marketing at HP's Technology Solutions Group, which is responsible for peddling servers, storage, software, and services. (Basically, everything HP does except PCs and printers and a smattering of financing). "CIOs are being asked to conserve cash, manage costs, and still deliver better technology."

But the stakes, it seems, are much higher. Citing statistics from the Corporate Executive Board, a hybrid market researcher and think tank based in the suburbs of Washington, D.C., Nelson says that during the last recession (which ran from 2001 through 2003 for all intents and purposes), 40 per cent of companies ranked in leadership positions by the CEB before the recession had lost that position by the time the recession was over.

"So making the right decisions, and getting the technology right, is really crucial right now," she says. "The thing to understand is that customers do not have to spend more money to drive changes."

And among the companies polled by the CEB, the average spending on innovation - new applications to chase new business - is twice as high among the best-in-class companies compared to the rest of the pack. Typically, that translates to spending two-third of an IT budget on maintaining the applications and systems they currently have and one-third on new code and innovation. And some companies are catching on to this idea or are learning from the last downturn.

Survey says...

HP has been surveying its own customers to find pain points and hone sales pitches, and 38 per cent of the companies polled said that they believe the current economic climate is an opportunity to restructure and refocus their IT departments. Some 56 per cent of its customers are doing server consolidation and 49 per cent are looking at virtualization for servers and storage as a means to cut costs, says Nelson.

Another 50 per cent of the data centers polled by HP are looking at application modernization, and 40 per cent are looking at automating more of their data center operations. (She says that HP can pitch its various OpsWare, Mercury, and OpenView tools to get a return on investment of around six months for these tools). About a fifth of the HP shops who have IBM mainframes said they were interested in moving off these machines to other, cheaper iron. Companies are not locking down their data centers so much as looking at what they can throw overboard so they can move in lighter winds.

Because times are tough and attention spans are short, HP knows it has to move in quick, show companies what to do, and make a fast return on investment. The mantra of the TSG sales force this year will be "standardize, optimize, automate, prioritize, and finance."

Standardization is not new, of course, but it is hard to make stick in data centers where disparate gear seems to pop up like mushrooms and other fungi on the forest floor. But that is the first thing HP will try to convince companies to do - get rid of other iron and simplify their server and storage setups. (HP tried to bolt its new EVA6400 and EVA8400 disk array announcements onto these services offerings, but El Reg didn't fall for it and has provided separate coverage of these hardware products). The optimization part of the sales pitch is to start using server and storage virtualization to drive up the utilization on the iron already in the data center or new iron that is more virtualization-friendly that is brought in to replace the existing iron.

The automation pitch, as mentioned above, is based on a mix of tools and is really aimed at high-end customers using the mix of software project and IT portfolio management tools that HP has created from various sources (and that are used at hundreds of large organizations today). Nelson says that on average, the customers using these tools have been able to shave 6.5 per cent off their IT budgets simply by better automating their data centers.

The prioritization pitch is about HP helping customers figure out where to start doing something as well as allowing customers to pick different service level agreements for application management or outsource services that come through EDS. HP Services is offering one- or two-day services engagements that bring in HP techs to figure out where a customer can get the best bang for the buck to start a server consolidation or virtualization project, for instance.

Application Management Services from EDS is now offering multiple tiers of services, and if customers are willing to accept some downtime for those services, they can chop their bill by as much as 40 per cent. The idea is to provide five-nines availability for truly mission critical applications, but to honestly assess what applications are merely vital and can be put on, for instance, on systems that are not clustered for high availability but are nonetheless on reliable machines that do not tend to fail anyway.

In a similar vein, HP Services is offering multi-tiered, hybrid data center design services that help customers to shape the layout and construction of data centers to reflect the different levels of availability that applications need. Making the entire data center double or triple redundant may be nice, but it may also be very expensive. HP says that by rejiggering data centers to provide different service levels for the gear running in them, it can shave data center capital costs by 15 to 25 per cent. ®