Will HP's Cloud-Focused Restructure Pay Off?

Hewlett Packard’s CEO, Meg Whitman, said the painful move was part of a strategy to refocus the hardware and software giant on what she describes as "some of the biggest shifts in innovation that I have seen in my career,” Wired’s Epicenter reports.

One part of the HP business that faces deep cuts is its services business, which saw revenue decline 1 percent year over year. HP bulked up on services when it bought EDS for nearly $14 billion in 2008, nevertheless it has struggled since. It's due for a change, Whitman says. "Services is a turnaround, and it's going to take three to five years," she says. What it will take, Whitman says, is moving away from slower-growing, lower-margin services — typical IT outsourcing offerings - to faster-growing and higher-margin cloud services, application-modernization services, security and data analytics. "Headcount will be down" in the services business, Whitman says. "Yet I believe we will have a smaller, more profitable services business over the at once two to three years."

The power to dramatically accelerate

HP has the power to dramatically accelerate and widen the adoption of both private and public cloud computing. And with that will come a whole new set of customer needs. Whether that's the need for integration over point-solutions, or the need for management of stateful machines instead of bring-it-up and burn-it-down instances. HP Cloud Services is not going to put Amazon and Rackspace out of business. HP is going to get the business Amazon and Rackspace can't get.

Need proof? Consider the quarter-billion-dollar contract HP closed along with General Dynamics to provide private cloud solutions for the U.S. Army previously this month. There's no one else in innovation, save IBM, that could have earned that business. The other HP is full of "elephant hunters" who know how the system works and have made careers of working it.

The services

HP has the services and consulting pieces of the puzzle that big businesses, government agencies and other elephantine accounts need to feel comfortable with this whole cloud thing. That's not a capability that other IaaS providers have developed, let alone practiced for the past 40 years.