HP Restructuring to Capture Cloud Wave

Jun. 3.10 | About: HP Inc. (HPQ)

Tuesday’s announcement by HP (NYSE:HPQ) that it is cutting 9000 workers and hiring another 6000 as part of a $1 billion multi-year effort to redesign its data center operations and automate its enterprise services is the latest indication of the traumatic impact which today’s cloud computing phenomenon is having on the tech industry.

HP readily admitted in its announcement that its goal is to,

…Consolidate Enterprise Services’ commercial data centers, management platforms, networks, tools and applications to create a more scalable, modernized and automated IT infrastructure that will better serve its clients’ needs.

Although the company didn’t specify where its cuts would take place, I suspect that the bulk of the downsizing effort within the Enterprise Services division will involve offloading the legacy data center facilities and staff which came from the EDS acquisition.

My sources within the company have confirmed my original concerns about the acquisition that the EDS deal brought more baggage and little innovation to HP’s oldline outsourcing business.

Anybody who follows the traditional IT outsourcing business knows that it has suffered as a result of the emergence of more cost-effective and less risky cloud computing alternatives.

Like the incumbent software vendors (ISVs) who have had a tough time keeping pace with the rapid rise of Software-as-a-Service (SaaS) insurgents, traditional hardware (“systems”) vendors are facing a similar challenge in the Infrastructure-as-a-Service (IaaS) segment of the cloud computing market.

After years of internal infighting, which did little to bring about a clear cloud computing strategy or set of solutions, HP is now forced to make dramatic moves in order to ensure that it doesn’t fall significantly behind the cloud computing leaders–Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Rackspace (NYSE:RAX), etc.

Unfortunately, HP’s housecleaning efforts will likely cause even more internal strife and distractions among the company’s employees before it produces tangible business benefits for its customers.

However, if HP doesn’t take these painful steps it risks far greater consequences as the cloud computing movement becomes mainstream.

HP’s efforts to rearchitect its operations and retool its staff is not only an important bellweather for tech vendors, but should send a clear message to CIOs and corporate executives with enterprise organizations as well. They should be taking a hard look at the way they operate to ensure it is relevant in today’s rapidly changing business environment.

I recently recorded two podcasts for TechTarget’s SearchCloudComputing web portal regarding the new IT skills and vendor management requirements which are critical in cloud computing.