Cisco, Dell, HP, IBM, and Oracle– Who is capable of a business turnaround?


The speed of transformation of technology buying as organisations globally embrace the cloud, change their device buying in the shift to mobility and the “Business” has a greater say in technology expenditure has been incredibly profound and underestimated by all and sundry.

As a result of this, key providers in the market are under considerable pressure. A quick review of the quarterly numbers of the five largest data center and hardware infrastructure providers highlights the pressure that these firms are under. The pressure is not just for one quarter. For most, particularly those selling commoditised server or personal devices, this pressure has been constricting for multiple quarters.

In the last reported quarter for Cisco, Dell, HP, IBM and Oracle, results were very mixed. The following challenges were reported upon

  • Cisco – A flat FY14 Q1, with a decline forecast in Q2 of 8-10%
  • Dell Storage revenue fell 7%, and PC revenues fell 5%
  • HP – Business Critical Systems fell 17%, Enterprise Services fell 9%
  • IBM – STG revenue was down 17% in the last quarter
  • Oracle Q1 Hardware numbers (legacy Sun) fell 14%

Clearly these are difficult numbers and across a range of technology areas from consumer devices to storage. What it highlights is that there is massive need for a turnaround at these organisations. Some will look to asset disposal, (IBM as the prime case), Dell has changed its ownership structure and Cisco has had to take a Mea (maxima) Culpa on its strategy in markets such as China to attempt to stem challenges.

The clear question is who of these five vendors is best placed to turnaround the business. Of course all want to, need to and will do everything to transform. As anyone who has faced it knows, massive business transformation is difficult to do in public or private. It takes massive amounts of executive bandwidth, patience which is not always available and a lot of pressure on employee morale as jobs are cut and benefits pruned.

Cisco and Oracle may struggle with the turnaround because; to be frank it is not something they have had to do often before. Oracle is the United States of companies. It is a group of tightly delineated firms connected from east to west with a common President, but with as much variance and independence as New York to Alabama in terms of culture and alignment (think Peoplesoft to Sun, to RightNow). It is perhaps comforted by the fact that the Infrastructure and hardware business is not the core of what Oracle provides customers.

Dell has chosen to turnaround in private. This of course has many strengths and weaknesses. Personally I am a fan of firms being able to transform in a private ownership model, but I do not believe that Dell has yet shifted enough from selling products to selling solutions.

My money is on IBM and to a lesser extent HP. Whilst both are far from flawless, they have been on major transformations before. HP absorption of Compaq was largely successful and had a number of turnaround elements. Clearly IBM had a near death experience before reinvention as a software and IT services firm in the 1990’s. It has the strategy through analytics, and “smarter” services to shift towards, it just needs to make the tough decisions to transform. These decisions will be made across the board. It is no guarantee of success, far from it, but given the massive challenges faced, it can have some confidence that it has seen this pressure off before.

Clearly 2014 is critical. We will have a good idea in 12 months as to who has transformed most successfully and who runs the risk of irrelevance and obsolescence.

If you require further information, please contact Phil Hassey, Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,
phil@capioit.com

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
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