HP Fuses Server, Storage Units

A year after Compaq and Hewlett-Packard Co. (NYSE: HPQ) banded together, the company has combined all of its server and storage operations into a new hardware business unit, called Enterprise Storage and Servers (ESS) (see HP Merges Storage, Server Groups).

The move mimics IBM Corp.'s (NYSE: IBM) decision to join its previously independent server and storage divisions into a single Systems Group in January 2003. Great minds think alike? (See IBM Merges Storage, Server Groups.)

Peter Blackmore, executive VP of HP's Enterprise Systems Group (ESG), which oversees ESS, said in an interview with Byte and Switch today that the company wants to get "efficiencies and energies" by combining its server and storage groups [ed. note: what, no synergies?].

"As you get to an organization that is simpler, you have one operations group, one hardware group, one software group," he says. "You get efficiencies and energies, and you can accelerate growth -- and in a flat market like this one, we're hungry for growth." Most of HP's storage sales, he noted, are in conjunction with sales of its Windows or Unix servers

He also said that an organizational structure that is geared toward integrating two large companies -- to perform such tasks as phasing out product lines -- was "not the one you want, once you've done all that."The merged ESS hardware group will be run by Scott Stallard, who previously was in charge of HP's Business Critical Systems unit. Four product line VPs will report to Stallard. Network Storage Solutions will be headed by Bob Schultz, previously VP of the HP Network Storage Solutions marketing and solutions team. Schultz was previously COO of Adaptec Inc. (Nasdaq: ADPT). The other product line executives in ESS include Pauline Nist for NonStop Servers; Rich Marcello for Business Critical Systems; and Brad Anderson for Industry Standard Servers.

A former HP storage executive, who wished to remain anonymous, says Schultz's appointment "was not unexpected, but the rank and file are not convinced that he is The Man."

Howard Elias, who was previously general manager of HP's storage group, will become senior VP of a new group, called Business Management and Operations. Elias will now be responsible for "managing strategy, planning, and business operations for ESG," HP said in a statement.

John Webster, senior analyst and founder of the Data Mobility Group, says unlike the IBM decision to merge its server and storage groups, HP's move appears to be all about cost structure.

"Comparing the two, HP's is trudgingly matter-of-fact," he says. "Id give IBM at least a point or two for visioneering." [Ed. note: I'd give John a point or two for silly wordplay.]But the fact that HP is subsuming storage into a larger server-oriented group may lead some observers to believe that it's downplaying its storage focus. That's obviously how EMC Corp. (NYSE: EMC) is spinning the latest machinations by one of its main rivals.

"While the big guys like HP and IBM continue to move towards the 'watering down' of their investments and innovation in storage, EMC is expanding its product portfolio," says EMC spokesman A.J. Ragosta.

Blackmore, though, says the combination of the server and storage groups will result in greater growth opportunities: "Our argument is that we've overtaken EMC... We have a lot of benefits that EMC doesn't. It will be harder for EMC to compete as a standalone storage vendor."

HP said there are no layoffs associated with the reorganization. "We're through the bulk of the restructuring," Blackmore says.

The company also said it will make no changes to its Software Global Business Unit, which is run by senior VP Nora Denzel, who was VP and general manager of HP's storage group before the Compaq merger.— Todd Spangler, US Editor, Byte and Switch