HP outlines long-term strategy

Two weeks ago, HP CEO Mark Hurd, the company's board of directors and senior executives gathered at the computer giant's annual management retreat to discuss long-term strategies.

In marathon sessions that spanned the course of several days at the posh Esmeralda Resort & Spa in Indian Wells, California, HP's leadership hashed out HP's long-term strategy. Those in attendance worked from early morning to late evening, with few breaks given beyond meals, said a source with the company.

"By the time the lectures were done at 10 p.m., we were pooped and went to bed," the source said. An HP representative declined to comment on the planning sessions.

According to the source, HP is considering making more acquisitions in the infrastructure software arena. Those acquisitions would include security software companies, storage software makers and software companies that serve the blade server market.

The acquisitions would dovetail with HP's growth plans for its Technology Systems Group, which has already bought companies such as AppIQ for storage management.

Hurd has previously said market trends indicate a movement away from mainframe computers and a shift to blade servers, as well as virtualised storage. HP is likely to follow those trends.

Meanwhile, in HP's Imaging & Printing Group, the long-term plan to develop commercial printers is likely to continue.

"We want to develop the next Heidelberg press," the source said. Of course, HP said basically the same thing back in 2002.

On the chip front, although HP and Intel have had a long relationship involving their collaboration on the Itanium chip, delays by Intel have created frustration in the HP camp, the source said. As a result, HP may use Intel's archrival Advanced Micro Devices as a cattle prod of sorts to the chip giant, the source noted.

"We plan to use AMD's Opteron more and more," the source said.

Opteron competes chiefly with x86 chips such as Intel's Xeon. HP sells ProLiant-brand servers with as many as four Opteron or Xeon processors. However, x86 chips have steadily gained in computing power and overlap in abilities with HP's lower-end Itanium servers.

Intel declined to comment, other than to note that HP has been a very valuable partner, said Scott McLaughlin, an Intel spokesman.

Last July, HP announced that it had hired Randy Mott, Dell's former chief information officer. Mott, who serves as HP's CIO, previously managed Dell's Internet and Web-based infrastructure and had also worked at retailing giant Wal-Mart Stores, where he devised the retail and supply chain automation systems.

Mott will help HP implement the back-end processes that are needed to operate a top-notch direct-order Web site, said Roger Kay, president of Endpoint Technologies Associates. Information-intensive tasks like gathering and sorting reams of customer data and quickly reacting to changes in component costs are vital to improving the efficiency of a direct sales operation, and Mott's experience implementing such a system at Dell will be invaluable to HP, Kay said.

At the same time, HP has to avoid antagonising its retail and channel partners with a renewed push toward direct sales, he said.

"When you go from direct to indirect, the only people who get upset are your own sales force," Kay said. "But if you've got distribution and you go direct, you're competing against the people that help you."

Improving its direct-sales operation allows HP to get closer to its customers and learn more about the areas the company needs to improve, said Stephen Baker, director of industry analysis at NPD Techworld. This could actually help HP's retail and channel business by allowing it to understand what its channel partners go through when making a sale or dealing with support, he said.

HP has little choice but to improve its direct sales model to compete with Dell and to sell its products more efficiently, said Baker. Retailers are faced with the same problem, and several have resorted to carrying inexpensive private-label brands to compete against direct sales vendors, he said.

Though HP's direct sales technology is expected to undergo changes, one thing that's not likely to happen is a merging of the HP and Compaq PC brands, the source said. Because the Compaq brand is still recognised in the market, it offsets the additional costs associated with maintaining two brands, the source said.

This approach makes sense, but HP needs to do a better job of differentiating between the two brands, Baker said. The Compaq brand has gone through several changes since HP bought Compaq, from a leading PC brand to the low-cost position it currently occupies within HP, he said.

Clearly, getting a better handle on what customers want is a big item on the agenda. Hurd has already talked about developing a next-generation data centre architecture, which would consolidate the information it has spread across 700 different locations into a data centre that would provide one, simplified view of its information.

Through its beefed up data centre, HP hopes to gain a greater understanding of its customers and markets, Hurd has said in the past.

And from a services perspective, HP is hoping to leverage its own beefed-up data centre with its services business, via running customer data through its own centre.

And while HP has struggled with getting customers and the market to understand its "Adaptive Enterprise" concept, the same mistake will not happen with HP's "Next Generation Data Center Architecture," the source said.

"Adaptive Enterprise. What is that? No one understood it," the source said. "But the 'Next Generation Data Center' is something that everyone can understand. The name is (cumbersome). Don't be surprised to see it changed."

CNET News.com's Stephen Shankland contributed to this report.