Wow—HP is finally getting its act together in storage. For years HP has talked about leveraging the systems and storage business but that vision has never materialized as a serious differentiator. Guess what? It’s finally happening.

And there’s an added bonus, HP’s move to compete with Cisco makes it the only company on the planet that owns a robust server, storage and networking stack.     How did that happen? Here’s the simple formula:

Hire someone (Donatelli) that understands the business and can execute

• Keep the best executives, restructure the talent pool and bring in people you trust
• Create a vision with big time goals
• Set some specific, measurable objectives and put a strategy in place to meet these
• Hire more great people – including a boatload of feet on the street
• Organize and incentivize them properly
• Acquire Ibrix and 3Com.
• Execute

That’s the play.     Having just spent two days at an analyst event I came away much more enthusiastic about HP than I have in more than a decade. I witnessed a mashup of matured EMC testosterone with HP professionalism and management excellence. Throw in an enormous dose of $50B supply chain muscle and you have a serious player with a new kid on the block mentality.

HP Goes Commodity

Someone said to me the other day (trying to disinfect my recently Donatelli-ized brain) “HP is going commodity – they’re hosed.” My response: When Mark Hurd took over HP its PC business was sucking wind. Last quarter it threw off about $500M in operating profit. If that’s commodity, I’ll take it. Shades of Jerome B. York people—cut the fat; print cash.

Everyone on the planet is talking about modular components. But from what I saw this week HP is way ahead in terms of developing a single modular platform that combines servers, storage and networking. EMC’s doing some good work between midrange and V-Max. Cisco Nexus – nice package. IBM blades…good stuff. But HP is combining server, storage and network packaging in a single platform. And with the largest supply chain leverage in the world it will do some damage. Son of Storageworks x 3 folks.

HP Going for Growth—Low end Block and Scale out NAS

Donatelli and Roberson both cut their teeth in a high end block-based world and they have their sights set on growth– Ironically, low end block with Lefthand and scale out file storage with Ibrix. The product strategy is to have a single modular platform with common components; make the storage controller a commodity server and give the system personality through software. Block, file, name your protocol, scale out, single name space, virtualize the IO and network, differentiate with flexibility and responsiveness.  Oh and did I mention cost structure is important? Shades of NetApp with a $50B supply chain leverage.

HP’s version of V-Block with a $50B supply chain. That’s equal to the combined revenue of VMware + Cisco + EMC. What about VMware integration you ask? Fair question– how does HP differentiate?

What About Differentiation?

Over lunch at the analyst meeting I was speaking with Christine Reischl, HP’s Senior Vice President and General Manager of Industry Standard Servers (ISS). She flat out stated that for HP, virtualization has to be about more than the hypervisor; that HP needs to find ways to differentiate through packaging, cross server/storage/networking group synergies, virtual IO—i.e. unifying management and IO, scale out, mission criticality, energy efficiency, etc.

Here’s another form of innovation. HP has struck a deal with the Microsoft devil to make purpose built appliances for Microsoft Exchange, SharePoint and SQL. Microsoft’s head is up its DAS but HP doesn’t care because it has a deal to sell Exadata-like appliances along with Mr. Softy.

And once HP completes the acquisition of 3Com it will be a very solid #2 in networking in the data center behind Cisco. Can HP compete with trying-to-re-invent-the-Internet Cisco? You bet. While Cisco is announcing that the CRS-3 will change our lives, HP is plotting to cut data center networking costs and simplify the lives of IT managers across the planet. Is there a market for that? Um. Ya.

Any Gaps?

Of course. HP’s storage portfolio is still fragmented and needs to be rationalized. It has to transition from a block-based EVA installed base to a new modular unified storage world. HP appears to have missed the data deduplication boat and needs to figure out the whole data reduction thing. Of bigger importance, it doesn’t own the hypervisor and is out of the running (for now) in the really big software land grabs. Software represents only about 3% of HP’s revenue yet the company continually touts taht it is the 6th largest software company in the world (this is based on U.S. revenues by the way)– HP can do better in software.  And the EDS integration is still taking a long time; although EDS is a huge asset long term, especially in vertical industries for HP.

But the bottom line for me is the new organization. Dave Donatelli, Randy Seidl, Garry Veale, Tom Joyce—all ex-EMC, all really competent, well connected, motivated and serious players. HP’s ESSN (Enterprise Storage Servers and Networking) is hiring hundreds of sales people and they report to Donatelli. Inside of twelve months, Donatelli has made this happen plus acquired Ibrix, is in the process of acquiring 3COM and has struck an important deal with Microsoft.

I can’t wait to see what happens in the next twelve months.