Tuesday, April 23, 2024

HP’s Not So Secret Plan to Make Cisco Extinct

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Recently I was at HP’s labs to see their latest advances in optical switches, and there’s a lot of backstory here.  However, the OMG takeaway for Cisco is that HP plans to have an optical switch in the market that is 20% cheaper than a traditional electronic switch — or 1/10th the price of current optical switches in the market within 5 (think 3) years.   

Worse, the product has been designed to be very inexpensive to upgrade and the resulting products could span SMB to multi-national enterprise markets.    Cisco is still largely a network fabric company and if HP is successful, given their size and scope, it could make Cisco as extinct, just as what Intel did to Sun on servers.   

However, that isn’t even the most interesting part. The interesting part is that HP got to this point by both going back to its initial roots, and partially through a secret project that Mark Hurd nearly killed.    

Back to the Roots

Over the last decades two CEOs that were brought in, Carly Fiorina and Mark Hurd, made some horrid mistakes.   Had these mistakes not offset each other the combination could have made HP obsolete.  

Fiorina’s mistake was to eliminate the legacy of the founders, replacing them in the company with herself.   This not only assured her legacy would be erased as well but it turned much of the company against her and she was largely shot from inside the company.   However, while she believed in R&D and funded it heavily, she didn’t want to go to war with Cisco and didn’t want to fund networking research. 

Mark Hurd, who my friend Roger Kay thinks is now “descending into hell”, was a cutter and a disingenuous one at that, in that he didn’t practice the same austerity program with his own perks and he shared with Fiorina the unenviable problem of being shot by his own folks.   

He wasn’t strategic at all and cut R&D significantly effectively eliminating much of HP’s strategic advantage to optimize quarterly income numbers and his compensation.  Had he not been fired this would have put HP in dire straits when he eventually left on his own.  

However, inside HP there was one researcher named Stan Williams who, through all of this, kept Optical Research alive in HP.  

The Hero Inside

I ran into Stan last year on another HP labs tour and he told the following amazing story.   After executive management pulled the plug on the research, Stan shifted funds to continue the work.   Buying equipment from going-out-of business sales after the Dotcom crash he built one of the most advanced optical labs in the world and continued to work, eventually creating prototype for what appears to be the most advanced and cheapest optical switch in the world.  

If this hadn’t been done HP wouldn’t be in a position to wipe the floor with Cisco. And when Cisco declared war on HP, Leo Apotheker was likely pleased to find that in HP there was the equivalent of the Manhattan Project in optical switches. 

Cisco may have fired the first shot, but largely thanks to Stan, HP is in a good position to fire the last one.  

Building a Legacy and Fighting the Company

One other interesting thing about my visit to HP is that there is now a shrine to the founders in the lab.   The original offices have been recreated with their notes on the desk, chairs, even the cork flooring has been restored.   The offices have been restored to exactly what they once were.  

What made the Bill Hewlett and Dave Packard successful at HP was that they fought the company.    They had a way to focus the company’s efforts that went to the core of HP’s initial success.   Fiorina tried to do this but by trying to replace the founders she eliminated the support needed to be successful. Hurd effectively turned HP into a group of loosely knit divisions.   Both of their legacies have largely been purged from the company as mistakes.   

Leo Apotheker has recognized that if he builds on the legacy of the founders he will have a legacy as well and by so doing he is pulling the company into a fighting machine.   The end product coming to market not only reflects the wonderful work that Stan did but work from the server and storage divisions as well.   The end result will be a better set of products that will be scalable and interoperate to a degree that may be impossible for anyone else to match.  

In short, by going back and embracing the legacy of the HP, Leo is crafting a firm that can fight at full strength and not be crippled by infighting between the divisions.  A company that can deliver a product like this new optical switch, which was birthed from the loins of the combined firm, reflecting a power potentially unmatched in the market.  

Wrapping Up: Key Lessons Learned

There are a number of lessons I’ve learned by looking at HP in depth.  One is that heroes can exist in many places, including research and often it is through their efforts, even in the face of hostile executives, that the successful future of a company is born.   

Another is that a company that fights as a unit is vastly more successful than one at war with itself.   But the biggest lesson is that your own legacy may depend on how well you pay homage to the great men and women who precede you.  That sets a trend that you hope your successors will follow. Sometimes, if you try to eliminate the memories of your predecessors, your successors will likely try to eliminate your legacy as well.

Oh, and one more thing occurs to me. Cisco really didn’t think through the costs of turning the largest technology company in the world from a friend to an enemy.    I’m guessing they now have one thing in common with Mark Hurd and Carly Fiorina; they would like a do-over.  


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