John Joyner considers HP's recent surprising announcements about canceling the Touchpad and off-loading its PC/laptop lines. What does this step away from the client mean for the future?
Unexpected in their timing, recent announcements by HP that it is cancelling the Touchpad, and looking for "strategic alternatives" to the HP line of desktop and notebook computers are not so surprising. HP is responding early and decisively to the megatrends of cloud computing and IT consumerization. I agree with early analysis that these are good long-term decisions for HP, positioning HP for the higher-margin opportunities of enterprise software and services, in an IT world of user-supplied computing devices.
This move away from the client platform means HP sees its future in other slices of the information worker ecosystem. A megatrend towards cloud platforms for businesses of all sizes means that a conventional IT network will evolve into a scenario where client devices of various types connect to private, hybrid, and public clouds to get work done.
If you don't provide the client, there are two remaining hardware pieces of the ecosystem: The server and storage components that create the cloud environments, and the networking components that connect devices to the cloud. While the demand for conventional desktop PCs is expected to decline over time, there is no horizon yet in the continuing demand for cloud and networking components.
HP goes after the cloudThe largest public cloud providers such as Google and Microsoft operate with ultra-high density, massive-scale server farms built with custom hardware. Customers ready to migrate their IT off-premise can run their whole operation in the public cloud if that suits their business. For example, Microsoft's Office 365 combined with Microsoft Windows Azure and SQL Azure can completely replace on-premise servers for some organizations.
HP only loses business in this model-unless they are providing the consulting and management services that help transition their customers to the public cloud, and possibly writing native cloud applications for customers. Management and architecture of hybrid clouds (that combine public with private cloud elements) is a nascent industry where HP can lead from a consulting perspective, as well as profit from the private cloud hardware pieces.Then there are the many organizations that can't or won't migrate to public clouds, but will be compelled by economics to either build private clouds, or migrate to a private cloud hosted by a trusted service provider. In these private cloud scenarios, HP is already a market leader as a server and blade server vendor; see in Figure A the impressive 50% market share for HP blade servers in the first quarter of 2011.
Figure A - HP dominates the market in the Blade Server category with 50% share in the first quarter of 2011.
Private clouds consist of storage, compute, and networking ‘fabrics' designed to rapidly provision and scale servers and applications on demand. Blade server enclosures efficiently bundle those fabric elements, and are the ideal private cloud platform for many organizations and service providers.
Modest impact on PC sales, opportunity for others
An administrative convenience for enterprise customers, and often with cost savings, was the bundling of Server, Infrastructure, and PC sales and service from HP. There is an appeal and logic to getting your PCs, network switches, printers, wireless access points, servers, and storage all from the same hardware vendor. When HP drops their own line of PCs, organizations ‘locked into' the all-HP stack will be forced to make a decision.
Of course, we don't know exactly what HP's plans are for their Personal Systems Division. A possible scenario is a "Compaq" brand that is sold or spun off, and follows essentially a path like IBM and Lenovo. In that scenario, future business owners could buy Compaq instead of HP PCs, and not sacrifice much in the way of quality and features. There could be a modest increase in the per-PC cost for organizations that previously bought their servers, infrastructure, and PCs from HP in ‘big buy' deals.
Dell and Acer, the remaining U.S.-based PC vendors, would be the obvious beneficiaries for organizations that did not choose to buy ‘Compaq' PCs. In any case, the PC buying decision is definitively decoupled from the server and infrastructure buying decision. The opportunity is also there for organizations to embrace consumerization as an alternative information worker solution.
The end of the high end managed desktop
A final possible strategic implication of the HP announcements is a hastening of the end of the "Enterprise Desktop" as a predominant information worker platform. Here I'm talking about the high-end desktop PCs that are purchased and sometimes carefully managed in fleets, expected to last five or more years. HP has always been the market leader in this PC segment.
HP continued Compaq's legacy of offering PCs that cost three to five times what PCs cost in your local consumer PC outlet. Besides having 3 year on-site hardware warranties, these "industrial strength" PCs were optimized for remote management using technologies like wake-on-LAN, predictive hard drive failure alerting, and featured rugged construction and heavier metal chassis.These long-lived PCs in fact offered the lowest Total Cost of Ownership (TCO) to a business that did want to standardize on software images for just a few hardware models with long availability and support lifecycles. But even that low TCO is still a lot higher cost than not trying to deploy a standard desktop or notebook PC and software image at all. Table 1 may get you thinking about some of the implications of the consumerization of IT.
|Enterprise Desktop||Consumer Devices in the Business|
|100% Employer-provided hardware||Employee brings and supports their own devices|
|100% Employer-provided software||Mix of employee and employer-provided software|
|Wired to the LAN, always the same network||Wired or wireless, roam across networks|
|Gigabit speed on the LAN||Variety of speeds including wireless phone|
|3 to 5 year lifecycle management||Employee may change devices frequently|
|Conventional ‘fat' client/server applications||Web-based and/or cloud aware applications|
Table 1 - Implications of Consumer Devices as Enterprise Desktop replacements
There are some industries, such as healthcare, financial services, and government, where consumerization is not expected to work. The business will always need to provide the hardware and software for sensitive industries. However, for many other firms, there may arrive a logical tipping point where it is an easy decision to allow, encourage or even require employees to provide their own client hardware!