It's not absurd, there's no more Mark…
When Mark Hurd took up the reins as HP’s boss back in 2005, the company badly needed him to stabilize the business, drive up the stock price, while instilling discipline and cost-control into many of its global operations.
Whatever the reason for his demise (and quite frankly, he’s not Tiger Woods, so who cares?), he’s done what HP needed him to do – and this is a good time to put someone else at the helm who can start closing the gap with IBM and others. In fact, he should have gone sooner, because there’s a lot of ground to be made up right across the board.
One of those is a flagging BPO business that had outperformed anyone’s expectations before the EDS merger threw it into a confused shambles. The addition of EDS should have been the cherry on the icing-on-the-cake to drive the emergence of a major BPO powerhouse to challenge the likes of Accenture and IBM.
In pre-EDS days, HP was giving everyone a run for their money winning several mega F&A engagements, such as Nestle, P&G, Clorox and Molson-Coors, and were doing a great job bundling IT and ERP-enablement services around their BPO. The firm was also discretely picking off payroll-centric HRO engagements and building an impressive competency for running multi-country SAP-based payroll services. HP also boasts one of the world’s largest supply chains it could have leveraged to drive its source-to-pay offerings.
But Hurd rarely mentioned BPO in his speeches or strategy discussions – the business relied firmly on the determined leadership of some great individuals (you know who you are) who drove that business in spite of lacking much senior leadership support. Consequently, since the EDS merger, more of the BPO leadership exited the business, the ExcellerateHRO business was sold to rivals Xerox(ACS) and the firm is rarely seen in major pursuits. Instead, most of its BPO focus is polarized on the healthcare sector, which is smart, but not when the rest of the BPO areas are neglected.
Bottom-line, Hurd is one of those IT operations guys who didn’t quite understand the value and stickiness BPO engagements can bring to a IT-BPO services provider – he’s a dollar- and-cents guy, not a business transformation one. Accenture and IBM have multi-billion dollar BPO businesses. Infosys, TCS and Wipro are tenaciously growing BPO business that are threatening to surpass HP’s. Capgemini has also moved in front of HP in the pecking order in most deal pursuits – particularly in Europe. And even in the verticals, such as healthcare, up-and-comers like Cognizant are edging in front.
HP is a great company and has a solid base of BPO from which to build. But it’s “lost years” in BPO need addressing quickly by whomever next takes the hot-seat. And this time, there isn’t much time, in a polarizing industry with twice as many competitors. An acquisition or two will likely be needed to turnaround its stuggling BPO service lines… and we’ll be hinting on where this should come from very soon.
Posted in : Business Process Outsourcing (BPO), Finance and Accounting, HR Outsourcing, IT Outsourcing / IT Services
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Has it been considered that Hurd’s lack of BPO discussion was more a case of strategic privacy (something outside of the mainstream pure hardware/software company) that could raise public concern that they were flinging themselves beyond their comfort zone? Should the experiment fail would it be best to have it a silent (very large) corner of HP OR a business decision gone bad. Guess only Hurd knew is reasons for the actions he took and us arm chair observers to critique what has happened. It is also highly likely that some of the present leaders will suffer similiar stumbling points due to reaching a level where one starts to believe that you are immune from failure.
Regarding the departures of BPO leadership, I wonder if it was because of the lack of recognition or the human need to have public acclaim to fuel ones motivation for doing excellence?
I left EDS just prior to the HP takeover and had just tripled sales in the areas of BPO I was accountable for. Since HP has taken over, they sold off the HR BPO business and just about decimated the rest of the BPO business. HP is a product business. Hurd ran off all of the knowledgeable EDS execs and put ex-product execs in charge of the business. Is it any surprise that rest of the BPO business is going down the drain? It has provided fantastic oppportunities for other outsourcing companies to take over the business that EDS invented.
An excellently-framed post on the situation. A strange ending for Mr Hurd – seems like his own board shopped him at the end for many of the reasons you pointed out. He did his job when needed, but the company is badly in need of a new direction. As you rightly point out, the competitons is running away from HP and it needs to stop the rot,
JS
Phil,
A well thought-out analysis of Hurd’s tenure – and these issues stem well beyond the BPO business. Yes, it’s time for Hurd to be replaced, but his executive team and board needs to share some blame for the stagnation of the firm,
Stephen
From an AP perspective, I have been long disappointed that HP and EDS both separately and then together could not mount a challenge to IBM and Accenture in BPO. I believe that the IBM/Accenture effective duopoly is one of the reasons why BPO in Australia and other parts of AP has not taken off as much as we have expected.
I believe the HP acquisition was a good decision gone bad. Hurd thought that he could demand that all customers switch their outsourcing accounts to HP products. Ask IBM how well that one goes over. I know that in 2000+, the IBM product execs were complaining that the outsourcing side were selling more Sun products. Customers liked EDS for their software independence and don’t like to be commanded to change products.
The biggest issue for IT firms selling BPO is that BPO is NOT a CIO sale. You generally sell to the CFO and/or COO. The CIO is lucky to be included in the discussions and rarely is he/she included in the early discussions. I never had a CIO as a decision maker in any of my deals. Product sales execs are not used to selling at the CFO/COO level and try to go through the CIO (who rarely has clout in his own company). BPO sales execs understand this and have the relationships with the CEO, CFO, and COO to make those kind of deals.
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I think the HP BPO issue was silo issue… There were 2 heads leading the business, one in the US and one in Europe. These two gentlemen were vastly different people who did not believe in sharing… So yes, selling the HR BPO stuff didn’t help but there was no marketing money or other investments to lead the BPO side… leading to slim pickings and territory issues.
A shame really… it would be great to see HP become a contender and give the leading 4 BPO providers a good run for their money!
I totally agree with your position and frankly have been very disappointed by the lost window of opportunity that HP had to build on the EDS acquisition momentum. Many of us are still confused why Hurd and the leadership team did not choose to state a BPO growth strategy and put the team in place to market and win deals. The industry could have used another North American based competitor to IBM, Cap & Accenture. This strategy choice (or lack of) has enabled the offshore providers to gain rapid traction in the space. My existing clients who have legacy EDS BPO transactions will be bidding their current deals and most likely make the expensive transition to another “committed” provider.
You do have to wonder if MH stayed on too long – his successor has a major task to get that aircraft carrier back on the right course,
James
All very fishy – sounds like HP’s board were tired of Hurd’s style and wanted him replaced with a leader who can take the company in a new direction. They could easily have covered over these “indiscretions”.
Great piece – thanks for sharing what many people want to see!
A.
I wanted to further add that his ‘other’ activities are left to question and precipitated an action that follows traditional HP conservated value response. What we must remember however is that CHANGE may not always result in an outcome that we might find as better!
Phil,
It was probably already too late for Mark Hurd to make HP a true player in the global BPO market. Yes, there were several marquee logos such as P & G that added some relevance to their push into BPO, but the business was still generating less than $1 billion/year last time I checked. There are any number of pure-play BPO firms that have more revenue than that. And let’s not minimize the cultural and business model challenges that a product-centric enterprise has as they incorporate more services into the overall offering portfolio. Buying/building an IT services arm as an adjunct to a legacy technology products business is not nearly the stretch that adding multiple streams of BPO solutions is. BPO demands a significant critical mass of SME’s around each business process. That’s a significantly different model than the ITO skill sets that are tied much more closely to the underlying hardware and applications that are the heritage of the product-centric business. And EDS was never all that good at BPO prior to the acquisition. As a quasi-management consulting organization, Accenture has always possessed the core business process skills inhouse and the successful launch of a broad-based BPO practice reflects that. IBM just went out and purchased the business process expertise via PWC. HP will have to do something radical to become a significant player in BPO and that would have been necessary whether Hurd remained or not.
Bill Martin
HP was headed in the right direction when they launched BPO and the intial plan was for a seperate global business. A lot of changes and misdirections have caused what could have been a very successful business model into a big missed opportunity. Maybe someone will right the ship
HP did take the lead in Outsourcing Operations and always concentrated more on its internal Operations rather than external trade Outsourcing Opportunities. The short term gains of Labour Arbitrage overshadowed the long term gain of streamlining Global Operations and consolidating its Supply Chain and source to pay operations. As mentioned earlier it has made two major mistakes .
1) One of it being the tight control on IT spend, the loss of senior experienced IT and BPO staff leading to a very slow annual program of IT development implementations . The focus being more on data warehousing, hardware and IT infrastructural controls .
2) The second being lack of development centralized work process plan which kept getting more complicated with additional acquisitions and multiple platforms leading to Senior management concentrating on Internal BPO Operations. The realization that important Process control , speed and operational requirements cannot be shown in short term financial gains plan.
Hence naturally , systems development could not support rapid BPO plans. The focus on short term gains rather than understanding on the value people knowledge have lead to fragmentation of consolidation ideas with strong pulls between regional practices and operational methodologies of different verticals and business groups. This resulted in a stagnation of operational costs at just labour arbitrage levels and HP was not able to leverage the BPO outsourcing efficiencies . Naturally HP’s BPO costs would be more than Accenture , IBM , Cap Gemini, TCS , WIPRO and Cognizant. Thus external BPO operations are finding it tough to be competitive. Hurd’s successor need to really Shephurd into taking advantage of its BPO potential and capability .
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