In Boston this week as a guest of HP at the annual HP Industry Analyst Summit: It’s clear that the cloud is dominating HP’s collective mind in a way that surprises me. HP has never “got religion” before in the way that, for example IBM “got religion” about “On Demand.” But it has now, and it’s no bad thing. HP is rapidly becoming cloud-centric and not just in a marketing way. HP sees the cloud as a huge opportunity.

The Backdrop

It’s a changed world. HP is now the largest IT vendor on the planet and if you strip away its PC business and its printer business then it looks a bit like IBM. On the server side of the business it is kicking butt. It has been increasing its market share in x86 servers, non-x86 servers, storage and blades. It is #1 in all of these markets except for non-x86 servers and in the blades market it is embarrassing the competition having taken a 57% market share.

Following the acquisition of EDS, HP is now #2 in the world of outsourcing/consultancy, behind IBM Global Services, but ahead of Accenture (#3) and CSC (#4). While many commentators were negative about the EDS acquisition, I suspected it would work well (see HP and EDS: A Marriage of Convenience) and it has, thanks in part to a great deal of synergy. The merging of HP’s TSG consultancy business with EDS produced a joint footprint of 96% of the Fortune 1000, effectively doubling the presence of both parties in the large corporations. EDS had always avoided putting much server business HP’s or IBM’s way (why feed the competition) so now there’s an EDS dividend for the HP server business, mostly at the expense of Dell. On the other side of the line EDS is winning dramatically more competitive bids than before the acquisition, for example, in Europe EDS competitive wins are up from about 10% to 60%.

HP is more challenged in the software area, where it’s portfolio is relatively small (compared to IBM or CA) although it is still accounts for $2 billion in revenue. It is still digesting Opsware and no doubt there will be other acquisitions to beef up the portfolio. It misses a crucial element imho, in that it has no identity management and has to partner to deliver what is a foundational component of both service management and security.

The whole HP ensemble of services, software & iron maybe significantly less than IBM’s equivalent revenues, but it’s a much bigger foot print that it once was. Imho, IBM and HP now define the business model that is appropriate for corporate computing.

The Cloud On The Horizon

HP is embracing “the cloud” with enthusiasm. There’s a good reason for this, beyond the fact that the cloud has become the burning IT issue of the day. HP has been deeply involved in building the data centers for many of the social network companies whose primary demand is scalability and thus it has a very deep understanding of scalability in a variety of must-scale environments. Being the supplier of iron to Internet cloud operations is already a business line for HP.

At the other end of the cloud spectrum, we have traditional outsourcing, where EDS built its empire. The merger of HP’s TSG with EDS has created a consultancy division which is pretty much cloud ready in respect of large corporate contracts. So HP will span both the IT user and cloud provider market. What is not yet clear and what HP doesn’t appear to have decided yet, is whether HP will provide any services from the cloud itself.

I expect that it will in time, but right now it just isn’t a priority.