UPDATED 01:21 EDT / JUNE 07 2011

NEWS

HP’s Donatelli: “We’re Playing Offense, We’re Out to Change the Market”

For people familiar with the old, stodgy, slow-moving HP, David Donatelli is breath of fresh air. The company’s EVP and General Manger of the ESSN (Enterprise Server, Storage and Networking) division, who came over from EMC two years ago, says this about ESSN’s competitive position: “I like to talk about the two people being chased by the bear. Are we at perfection? No. But I just need to outrun the competition, they’ll get eaten by the bear eventually, that’s how I feel.”

Donatelli told Wikibon.org’s co-founder David Vellante and SiliconAngle.com founder John Furrier on the Cube at HP Discover in Las Vegas that “we feel we can put every single product by category we have up against the strongest competitor, and if the customer is going to pick by feature/function, we should win. Our goal is to be in that position every single day.” His efforts have paid off handsomely for ESSN: the division drove over $22B in revenues in HP’s most recent fiscal year, growing by 26% year-over-year, and so far this year has grown by another 18%.

He has certainly brought new competitive fire to the historically taciturn, by-the-numbers IT giant. “Our position is, we’re not going to let the market overwhelm us – we’re trying to change the market,” Donatelli told Vellante and Furrier. “To use a sports analogy, we’re playing offense, not defense.”

Most stacks being built today in the industry are very narrow, he said, and are “any way you like it, as long as it’s my way – that’s what we see from our competition.”

HP wisely sent to open standards many years ago, he said, and “if you’re going to do that, you have to change your business model so that you can be financially successful in a market dominated by standards. Many other folks in technology have not made that leap yet, so their business models are predicated on proprietary margins and proprietary lock-in.

“We’ve already made many of the tough changes that many in our industry are being confronted with,” Donatelli noted. “That puts us in a great position to play offense, and that’s what we’re doing.”

 

The executive said that the IT market is becoming more system-centric again, after being a “piece-part world for the better part of 20 years. Now people are buying more engineered systems, either loosely coupled or tightly coupled,” Donatelli said. “No doubt in my mind, if you look at cloud, that’s what it is.”

 

He is particularly proud of HP’s 3Com acquisition and market-share gains in the networking market versus Cisco. “In the networking space, even though we’re offering 35- 40% discounts over what customers are paying [Cisco], those margins are still more than double what we make on a server,” he noted. “And from a market-share perspective, we gained far more share in networking in a short amount of time than the competition ever gained in servers. If they do gain share in servers, they’re going to do it at less than half their corporate margin. I’d much rather be holding our hand and going where we’re going.”


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