Paul Strassman Keynote Address

1 May 22-24, 2007

Washington Dulles HiltonThe Business Transformation Conference

Paul A. StrassmannProfessorGeorge Mason University

SessionTitle:Transformation of HP Information Technologies

WelcomeWelcome

to Transformation and Innovation 2007 The Business Transformation Conference

2 May 22-24, 2007


HP Transformation Program

-Reduce number of applications from 5,000 to 1,500.

-Reduce the number of servers from 19,000 to 10,000.

-Increase server utilization from 20% to 80%.

-Consolidate 100 world sites for IT development to 29.

-Consolidate 85 data centers to six.

-Build a data warehouse to be SOA accessible.

-Reduce I.T. workforce from 19,000 to 8,000.

-80% of staff on new projects, 20% on maintenance.

3 May 22-24, 2007


HP vs IBM Share Prices

HP

IBM

4 May 22-24, 2007


HP vs. IBM Revenues

1995199619971998199920002001200220032004200520060

10

20

30

40

50

60

70

80

90

100

HP

IBM

5 May 22-24, 2007


Reduce Applications

Application Simplification

6 May 22-24, 2007


Example of Application Simplification

7 78

6 6 3

22 2 2 2 2

6 66

6 66

43 3 2 2 2

9 98

5 55

55 3 3 3 3

7 77

7 77

74 4 4 4 1

11 1110

10 1010

4

3 2 2 2 2

11 98

8 66

6

5 5 5 5 5

10 108

88

7

7

7 6 6 6 6

21 21

15

1414

13

13

44 4 4 4

17 17

16

1616

16

13

132 2 2 2

16 16

15

1313

12

12

12

7 7 74

30 30

27

2727

27

5

5

2 2 22

24 24

24

2423

22

15

13

10 10 1010

0

50

100

150

200

CurrentFY06 - Q2FY06 - Q3FY06 - Q4FY07 - Q1FY07 - Q2FY07 - Q3FY07 - Q4FY08 - Q1FY08 - Q2FY08 - Q3FY08 - Q4

Training & Cert

Dashbd & Reporting

Prog adm/compens

Data Collection

Portal

Newsgram

Marketing Mgt

Datawarehouse

C&R - deal

P & S Catalog

Quote/Config

Mkt Dev Fund

Locator

Acct Mgt & P.

Profiling

Leads Mgt

Data cleansing/Std

stock protect

contract

A2A Integ

Pricing Comm

Content Publi.

Fraud Mgt

Rebate Comm

Control - EUV

C&R - promo

Portal Metric

Domain (All) Primary Y Region (All) Owner GCP

Count of Asset Name

Period

Capability

7 May 22-24, 2007


Examples of Application Reduction

Consolidate personnel information systems into a single data base to be accessible from a portal.

Retire 84 procurement transaction systems into five.

HP portal offers capabilities for user-initiated inquiries.

8 May 22-24, 2007


Standardize, Consolidate, Integrate

67 52 79 56 83 95

33 48 21 44 517

0%

20%

40%

60%

80%

100%

Low Commonality

High Commonality

Marketing Ops

SalesOps

OrderMgmt

Supply Chain

Finance HR

9 May 22-24, 2007


Improve the IT Infrastructure

Reorganize the Information Infrastructure

10 May 22-24, 2007


Data Center Consolidation

85 locations to three geographical zones;

Two sites per zone with total space ~400,000 sq ft;

Lower cost structure – eliminate redundant costs;

Each site designed for high availability, disaster recovery and business continuity;

Refresh to current technology.

11 May 22-24, 2007


Data Center ConsolidationReductions Increases

60% retirement of

legacy applications

global applications

30% fewer servers

80% more processing

power

decrease in cost of storage

double the storage

half the cost of networking

30% more bandwidth

less HP IT cost

more capability

12 May 22-24, 2007


Continuity and Disaster Recovery Zone A

Site – 1 Site – 2

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Zone B

Site – 3 Site – 4

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Active

Dark

Business continuity

Disasterrecovery

Business continuity

Next generation data centers Next generation data centers

13 May 22-24, 2007


Backbone Network

Servers connect to the network at 1 Gbps;

Network edge switches interconnect at 10 Gbps;

Routing handled at network level rather than at the host layer– No need for host routing tables;– E-service networks will have a direct routed path to internal

networks;– Host will be connected to either internal or external networks;

Intrusion Detection System in front of e-services environment;

Intrusion Prevention System in front of internal networks.

14 May 22-24, 2007


Infrastructure PoliciesNo dedicated IP addresses; everything is Direct Addressing

Standard naming conventions used for all servers

All storage is shared; No dedicated storage

Business Continuity and Disaster Recovery is standardized

No regional application.

40% increase in use of shared services

Development and Testing in shared environments

Equipment provisioning to plan, not to future.

Applications transformed to operate globally and centrally

15 May 22-24, 2007


Database Administration

• 20+ ways to manage databases• 20,000 database incidents/month• Dozens of weak monitoring methodsProcess

Technology

• Global and standardized processes• <850 database incidents/month• Two global monitoring solutions

• 3 database technologies• 6 releases/year • <1,500 database failures• <4,000 databases• Pooled/virtualized IT resources

• 17+ database technologies • 150+ point releases/year• 5,830 database failures• 14,292 databases• Standalone servers & storage

Current Planned

16 May 22-24, 2007


Enterprise Data WarehouseLegacy applications = chaos Enterprise data warehouse = order

ContinuityConsolidationControlCollaboration

Single version of the truth

DataWarehouse

Production Control

MRP

InventoryControl

Parts Management

Logistics

Shipping

Raw Goods

Order Control

Purchasing

Marketing

Finance

Sales

Accounting

Management Reporting

Engineering

Actuarial

Human Resources

17 May 22-24, 2007


Global Data

Integrated Global Views

Worldwide Orders DataWorldwide Service Data

Other Data

Enterprise Data Warehouse

Thousandsof worldwide feeds daily

Middleware

Data is complete and detailed

Define, model and map all data

Ensure all data has integrity

Provide complete access

Flexibility and scale

All data entered only once

18 May 22-24, 2007


Standards

Standard servers and storage

Technology Standardization

Technology version harmonization

Increased virtualization

Load balancing, clustering, database mirroring

19 May 22-24, 2007


Deliver Improvements

Measure Progress in Transformation

20 May 22-24, 2007


IT Budget

$3.04 $2.11I.T. Spending - $ Billions

HP - 2004 HP - 2008

21 May 22-24, 2007


Example of Project Savings

22 May 22-24, 2007


IT Portfolio Scorecard

% Innovation vs. Sustaining

% Projects On Quality Target

Value-Added/IT Developer

Annualized Benefit ($B)

% On Time Delivery

Target PerformanceMetric

81% 90% 95% 98%

$150+K$250+K $350+K $450+K

80%75%60%

46%

90%85%65%

45%

$2.5B$2B

$1B

$3B

2004 2005 2006 2007

23 May 22-24, 2007


Workforce Directions

•Build world-class IT workforce–Predominately HP workforce with increased productivity;–Reduce contractors from 11,000 to < 5,000;–New skill-sets based on shift from sustaining to innovation focus;–Increased collaboration; –Increased co-location from 100 to < 29 sites.

24 May 22-24, 2007


Summary

HP Business Transformation case offers an opportunity to study performance improvement while costs are cut severely.

Cutting the number of applications becomes the driver for delivering performance and cost reductions.

Gains are primarily in freeing resources to shift from maintenance to innovation.

Case demonstrates the advantages of planned

centralization.

25 May 22-24, 2007


HP vs. DoD Budget Allocations

12%

38%

13%

37%

0%

9%

36%

54%

Available for Exploration and Agility

Application Innovation - RDT&E

Maintenance - O&M

Infrastructure

H-P (2008) DoD (2007)Distribution of I.T. Spending

26 May 22-24, 2007


DoD Transformation Comments

1,969,000

$30.6

151,000

$3.2

Staff

I.T. Budget - $Billions

DoD - 2007 HP - 2004

27 May 22-24, 2007


Thank YouPaul A. StrassmannProfessorGeorge Mason University

Contact Information:[email protected]

Paul Strassman Keynote Address

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