Speaking to several hundred security analysts in New York, Hurd said HP will continue to deliver tools that help users reduce hands-on labor costs and human error. "Instead of having a lot of humans" running data centers, he said, users will "want a 7-by-24, lights-out environment that is monitored, run and controlled remotely."
Anne Livermore, executive vice president of HP's Technology Solutions Group, was more specific about what IT shops can achieve through virtualization and automation. She said that with these technologies, instead of having one technician for every 20 servers, companies can have one technician for every 200 servers.
Hurd sees a continuing move away from mainframes and toward standards and utility capabilities that allow users to get processing power and storage as they need it. "The trend, I'm here to tell you, isn't going to slow down," he said. While "arbitraging labor" -- or reducing labor costs -- is an advantage, he said, the long-term opportunities for companies will come through IT automation.
Hurd, who took over as CEO in April, also said Tuesday that he will oversee a massive simplification of his company's own IT operations, consolidating more than 85 data centers in 29 countries to just six data centers. HP also plans to create a centralized view of its data by creating one enterprisewide data warehouse. HP now has 762 data marts.
To accomplish the consolidation, HP will spend US$2.8 billion on capital costs in the fiscal year that began last month, compared with just under $2 billion in the prior fiscal year. A major part of that spending will go for new IT infrastructure, real estate and other costs.
Automation is particularly important to HP Services, said Steve Smith, a senior vice president in that group, who said human error still plays a large part in service delivery. "Taking human error out is a huge advantage," he said.
HP will also continue to cut labor costs by using offshore workers in its services delivery. "We will continue to move a lot of work offshore as we grow this business," said Smith.
The company now has 19,000 employees offshore, representing about 27 percent of its services workforce; about 18,000 of those workers are in India. The offshore workforce has been growing about 30 percent per year, a trend that will continue over the next fiscal year, said Smith.
HP, which reported revenue of $86.7 billion for the fiscal year that ended Oct. 31, up 8 percent from the year before, is forecasting revenue growth of between $89.5 billion and $91 billion in the current fiscal year. The company has already announced plans to cut its workforce by 15,300 employees, or about 10 percent.
Charles King, an analyst at Pund-IT in Hayward, Calif., is watching Hurd's labor cutbacks warily. "You can achieve positive cash flow by reducing expenses, but at some point, [when] stripping jobs and product lines out, eventually you run the risk of negatively influencing whatever innovation options you are offering your customers," he said.