Hurd Harrumph
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Mark Hurd is a very likable fellow. I saw him speak at Oracle World this morning, and he is precisely the face, voice, and name Hewlett Packard needs at this point in time. He certainly appeared more light hearted today than he did while
testifying before congress recently.
Unfortunately he blew it. Likable or not, he put forth a proposition that tragically miscommunicated the market, and was a not-so-sly attempt to justify greater IT spending for HP gear. Can’t blame him for wanting to loosen up the taunt purse strings of CIOs everywhere, but his tactic fell flat.
Specifically, Hurd noted that as a percentage of total IT spending, capital investments were on a decline. He cited HP analysis, but I do not doubt
the veracity of the trend ( click on the image at right to see Hurd’s chart from
the keynote address ). Hurd also noted that more and more people are being
employed in IT, and that labor cost are rising. The total labor pool has
risen given the new entrants from India, Russia and China, and given the nearly
insane rate of salary inflation in India, I would not doubt that total IT spend
on humans is going up globally.
But Hurd claimed (in part) that the drop in capital spending was because IT
was holding onto ancient technology and merely pasting band-aids over a
faltering infrastructure.
Equine effluvium! You will notice by his own chart that capital
spending as a percent of IT’s total budget started falling during the peak — or
should I say pique — of the dot-com boom, when people where buying
servers faster than Michael Dell could bolt them together. So clearly, the
lowering of proportional IT dollars spent on capital goods was going down not
for a lack of build-out.
What Hurd and HP face is the commoditization of the stack, and thus the lower
cost to the buyer — which is precisely what the buyer wants. AMD/Intel
servers running Linux, as well as rapid deployment of other Open Source
solutions, have allowed CIOs to shift budget to people, which they desperately
need to install, configure, or code new capabilities. Despite standards,
IT is becoming more complex given the added value it delivers to the enterprise.
Thus the need for IT people power is outstripping the need for CPU power.
I think Hurd was simply misdirecting the audience as he had a secondary point
for his primary agenda. Using the argument about aging infrastructure,
and painting mainframes as old, outmoded and expensive, he announced that HP, Oracle and Intel would target mainframes for conversion. IBM has performed amazing feats in keeping the mainframe popular, from dropping total costs for deployment, to long ago porting Linux there. IBM
kept the mainframe relevant and cost effective, so Hurd needed an argument to
support his mainframe migration announcement, that being the "aging infrastructure" gambit.
I don’t know a single CIO who has not been buying up x86/x64 based Linux
servers in droves, new Cisco routers, and SANs networks, and more. There
is no lack of investment in needed infrastructure, so Hurd missed the
factual Mark.
