“One of things to think about long-term, once you evolve to a utility model, services don’t actually play a part in it – think about how many services you use to run your electric utility or your phone utility, as an end-user consumer of that. You don’t, it just works.” 

–David Scott, SVP, HP Storage, at HP Discover 2011

So maybe the traditional services business will eventually fade away. To be fair, David Scott was talking mostly about professional services, consulting specifically, when he made that very astute comment. As the former CEO of 3PAR, he’s lived the cloud/utility dream for a long time, and is now seeing his persistence pay off. And certainly cloud computing will change customers’ services needs radically, as it is doing already. 

But customers will always need services, at the very least in the form of customer support. At some point, things break, the server or the network goes down or gets hacked, and the customer’s business takes a hit as a result. That’s why when I think about HP Services, I think of Ann Livermore.

I was first briefed by Ann in 1995. As sales and marketing Manager in HP’s services group, she came into my employer at the time, IDC, and talked to the analysts about her company’s $4 billion services business, which in those years was almost entirely about customer support. This was back when HP was dyed-in-the-wool boring and proud of it. Stable, reliable, built on the HP Way. Ann laid out HP’s support services strengths – its rare ability to be able to support multiple vendors’ products, its global coverage, its many support centers – and answered our questions about how HP would compete with IBM and Digital, the other big services firms at the time. Then she closed the briefing and was on her way.

Fast-forward to 2005. Services at HP has become a big deal. Ann now leads HP’s Technology Solutions Group and is being discussed as a possible CEO candidate to replace Carly Fiorina. Meanwhile HP has already expanded its services business many-fold by acquiring Compaq in 2002, just four years after Compaq acquired Digital Equipment Corp. (DEC) and DEC’s massive services business. Before that, in 2000, Carly makes a bid for the Price-Waterhouse Coopers (PwC) consulting business, and is reportedly willing to part with $17 – $18 billion for the unit, a price she is widely criticized for. But HP needs to find a way to get into professional services, beyond support. IBM winds up buying PwC consulting in 2002 for $3.9 billion. In 2008, under Mark Hurd, HP acquires outsourcing giant EDS for $13.9 billion. After the EDS and Compaq deals, HP Services looks vastly different than it did back in 1994.

Or maybe not. Really, the story of HP’s services business has been about how it has never been able to move beyond its support business in any appreciable way. Granted, HP got so good at delivering support that its Support unit became reasonably profitable, through a combination of automation, efficient processes, and tons of experience. But at the same time, HP failed consistently, year after year, to grow its professional services business, despite bringing in talent and having a huge captive customer base to sell consulting to. The EDS acquisition has mostly resulted in more failed expectations, and with HP’s services revenues now making up nearly 25% of the business, the services failures are too big to hide.

New CEO Leo Apotheker has made it clear he wants more performance out of services, and has moved the support unit under David Donatelli, while the company seeks a new executive to lead its overall services business. And Ann Livermore will be leaving as head of the enterprise division and moving to the board. Looking back, maybe she was a little too stolid for the CEO role, too tied to the old HP that existed before the Carly years, the spying scandal, and Jodie Fisher. She seems to symbolize the potential and limitations of HP services over the past 15 years, never able to move to the next level despite being admirably dependable.

The Future

You can debate David Scott’s vision, but no doubt the services world is changing, and HP can’t afford another decade of services stagnation. The company bought a huge, global organization in EDS, but was it mainly with the idea that it could sell HP gear into EDS outsourcing contracts? Or compete with IBM Global Services’ outsourcing business? Or take EDS data centers and turn them into cloud computing centers? All of the above?

Apotheker’s right: HP needs fresh blood and new ideas to drive services growth. It needs a clearly defined services strategy. The company has invested far too much in services to let the business meander any longer. Godspeed Ann Livermore and goodbye to the traditional services world. HP needs to leverage the customer relationships it has built on delivering high-quality support over the years and bring its services business fully into the new era. This may mean radical makeovers in this era of cloud, big data, mobility and social media. Good customer support will always be important, but HP needs to find a way to finally add the other pieces to its services story, even as IT-as-a-utility threatens to make certain services irrelevant.  To take a page from a slightly older HP playbook, it’s time to fully apply “HP Invent” to the services business.