Speeches

ANN LIVERMORE
"Adaptive enterprise: business and IT synchronized to capitalize on change"
HP World
Chicago, Illinois
August 16, 2004

Good afternoon.

On behalf of everyone at HP, I would like to add my personal welcome to all of you here today.

For many years, it has been my pleasure and my privilege to come to HP World. This is actually one of my favorite parts of my job - having the opportunity to meet and talk with you, our most valued customers and partners.

I would like to thank Kristi Browder, the President of Encompass, and Denys Beauchemin, the Chairman of Interex, for their strong leadership and presence here today. Thanks to David Booth for his great introduction. And thanks also to this year's Platinum Sponsors - Cisco, Microsoft and Oracle.

But most of all, I want to say "thank you" to everyone here in the audience. Together, we celebrate a remarkable history of invention, leadership and strength. From the early days of our now-famous operating systems - MPE, NonStop, and OpenVMS - we've evolved together through the age of open, client-server computing system, through the revolutionary transformation of Internet computing, and now, to the next generation of information technology.

It was a little over a year ago that we introduced our strategy and our vision for where IT is going next. We call it the Adaptive Enterprise.

The Adaptive Enterprise is not a product that you purchase from HP. It's something that you build. It's a journey that you take - a journey towards making your enterprise simpler, more flexible, more manageable and, above all, more adaptive to change.

When those of us at HP try to distill the Adaptive Enterprise down to a single phrase, we say this: "Business and IT synchronized to capitalize on change." Business and IT synchronized to capitalize on change. The commercial that you saw a few minutes ago puts it even more simply. "Love change."

During the rest of my time this afternoon, I'd like to share some stories with you about what it truly means to have your business and your IT synchronized - and what a difference it can make to really be able to capitalize on change.

I'd like to tell you about some remarkable people. They are remarkable because of the journeys that they have made and because of the amazing results that they have achieved.

I'll start by telling you about a hero. His name is André Spatz. Some of you may have heard André's name before. For the last two years, CIO Magazine has honored him as one of the top 100 CIOs in the world. In fact, the magazine has just announced that they are honoring him once again, for the third year in a row.

André Spatz is the Chief Information Officer for UNICEF, the United Nations Children's Fund, headquartered in New York. And for André, IT is literally a lifeline. If his IT fails, people potentially die. Children potentially die. But if his IT succeeds, if everything works together correctly, then he can help save lives - millions of lives.

UNICEF

UNICEF was created in 1946, with a charter to serve the world's children in areas like education, healthcare, nutrition, vaccination and emergency response. UNICEF operates in remote and sometimes dangerous locations - including places that are affected by armed conflict, natural disasters, and other tragedies. Needless to say, this is an enterprise that faces constant change and requires tremendous flexibility.

When André Spatz joined UNICEF in 1997, there was no global IT organization. The infrastructure was extremely weak, with more than 100 different custom systems. There were few LANs, no WAN and no standardized desktop. E-mail was limited; in fact, 70 percent of the operating countries had a bandwidth of less than one kilobyte per second. There was an urgent need for business alignment, tighter controls and an effective governance system.

When André came on board, he was given three mandates:

First - to transform the IT organization from one that only supported headquarters to one that supported UNICEF's entire global operations.

Second - to identify how and where IT money was being spent and to reposition UNICEF's project and infrastructure portfolio to maximize their return on IT investment.

André's third mandate was to transform IT into a core enabling function for the overall organization - enabling UNICEF to better fulfill its roles in advocacy, information sharing, fundraising and operational management.

André had to do all of this for as little money as possible, because every dollar spent on IT meant one less dollar spent on things like books and vaccines for children whose lives and futures depend on both.

There were many companies that were willing to donate technology to UNICEF. They were willing to give them systems for free. But André didn't want just any old technology. He didn't want technology just for technology's sake.

André had a vision - a vision of IT - not as an overhead expense, but as a true business enabler. IT aligned with the business strategies. IT that would enable the business to do things that it had never been able to do before -- simple, manageable, adaptive and able to capitalize on change - because André believed that if you can get the IT infrastructure right, then anything is possible.

That was seven years ago. Today, UNICEF has a fully deployed ERP system in its headquarters, as well as a single, standard client/server field system in each of the 245 locations. They have a global IP network across all of the UNICEF countries - financials, logistics, transactions, human resources, distribution, warehousing, and marketing. They have implemented Voice-over-IP in more than 90 countries and it paid for itself in less than three months.

Every single office has a standardized desktop with a standard suite of applications, standard e-mail, office automation, Internet access, intranet and a minimum bandwidth of 128 kilobytes per second. You can go anywhere in the world, emergency or non-emergency, and have the same infrastructure.

UNICEF even has fly-away emergency V-SAT operations that can drop-ship an "office-in-a-box" to just about anywhere in the world, and have it set up and operational in less than four hours.

In addition to HP servers, desktops, printers, storage and services, UNICEF also relies on HP OpenView for its IT Service Management. In 1999, André undertook a year of rigorous evaluation and due diligence and, in the end, he selected HP to be UNICEF's strategic partner for enterprise management. For example, today HP Service Desk provides a single point of contact globally for critical IT and business support services - on a 24-by-7 basis.

UNICEF's accomplishments today are truly amazing. In 2003, with its partners, UNICEF was able to build 7,000 schools and hire 30,000 teachers in Afghanistan. They were able to put almost three million children back in school - including girls who had never been in a school before.

In Guatemala, UNICEF brought safe drinking water and sanitation to 13 municipalities and, as a result, infant and maternal mortality rates have dropped by 25 percent.

In Peru, UNICEF supplied boats, solar-powered refrigerators and other supplies to save two ethnic groups from total extinction due to hepatitis.

This year, UNICEF will supply 2.5 billion vaccines to children in developing countries. This amounts to 40 percent of the world's total vaccine dosages for children.

Simplification. Standardization. Modularity. Integration. IT has fundamentally transformed the way that UNICEF operates. It has improved global knowledge, information flow, transparency and communication. Field offices can serve their constituents - based on transaction-level and value-added information - that they could not access only a few years ago.

Together, André Spatz and HP are creating an Adaptive Enterprise for UNICEF where business and IT are synchronized, to capitalize on change. And as I said before, UNICEF lives with change each and every day.

Every journey is different. Different companies start from different places and they have different goals that they're trying to achieve. Managers have different business requirements in terms of how much flexibility and agility they require.

For some companies, the best approach is to buy products and solutions from HP and our partners in order to build and manage their own Adaptive Enterprise. In the case of UNICEF, André Spatz chose to partner with HP at a strategic level in order to build an Adaptive Enterprise together.

And then there are other companies who don't want to worry about IT at all. They'd rather concentrate on their core business. So they turn to HP to build and manage an Adaptive Enterprise for them.

Procter & Gamble

I'd like to share the story of another organization, one quite different from UNICEF but with a similar need to capitalize on change. Many of you are familiar with the story of Procter & Gamble, but it's a story worth telling.

Procter & Gamble started in 1837 as a small, family-operated soap and candle company in Cincinnati, Ohio. Today P&G markets nearly 300 products to more than five billion consumers in 160 countries.

Sixteen of P&G's brands are billion-dollar businesses - brands like Crest, Folgers, Pampers, Pringles and Tide. Overall, the company has a 99 percent household penetration rate in the U.S.

Unlike UNICEF, P&G didn't have an IT infrastructure that needed "fixing." In fact, P&G had already built one of the most adaptive enterprises in the industry, but it wanted to do even more.

P&G wanted to streamline its structure and to focus on its core competency, which is to develop and market consumer products. It wanted to increase its market share and widen its leadership position. In order to accomplish these goals, the company needed to reduce the complexity of "the business of IT," and enhance its business agility.

So P&G turned to HP to manage its entire IT infrastructure - including desktop systems, data centers, servers, application support and maintenance. This would enable P&G to leverage HP's economies of scale, as well as provide more cost transparency to the business units.

I love the way that Linda Clement-Holmes tells this story. Linda is the director of Infrastructure Services for P&G's Global Business Services Unit. And Linda is the manager who was responsible for P&G's side of the handover and transition to HP.

Linda likes to say that we got "engaged" on May 5, the day that we signed the contract. We got "married" on August 1, when the actual transition took place. The weather was lovely, it was a wonderful day and the wedding was beautiful.

P&G approached the handover with the same level of detail and planning that went into Y2K. Does everybody here remember Y2K? P&G's transition project plans included 3,700 separate tasks. The handover would affect almost 2,000 employees in more than 50 countries simultaneously.

So P&G had rooms full of support people who were told that they wouldn't be leaving for weeks. They had food. They had cots. They had telephones. They had clocks synchronized all over the world.

In the end, they received a total of seven phone calls. And they were all from the same person. So, needless to say, the transition went smoothly.

We celebrated our first anniversary just a couple of weeks ago. Today, there has been a continuous improvement in the delivery of IT services and a continuous improvement in the level of cooperation between HP and P&G.

As of May, user satisfaction at P&G is at 4.8 out of 5, based on help desk surveys. Critical request resolution has improved significantly. And P&G is particularly impressed with HP's process improvements in change management.

In many ways our journey is still just beginning. For instance, earlier this year, P&G enhanced the "marriage" by asking HP to manage their transactional accounts payable. We just turned the switch on at the beginning of this month. Again, by capitalizing on HP's expertise, P&G expects to dramatically reduce its F&A costs as a percentage of revenue.

But in addition to the efficiencies and economies of scale that HP brings to P&G, we also bring an incredible wealth of invention and innovation that comes from our HP Labs - and the $4 billion that we invest in R&D every year. Together our two companies are investigating and exploring transformational innovations such as Zero Latency Enterprise and Adaptive Network Architecture.

Recently, we've been working together on RFID, the radio frequency ID tags that could well replace bar codes. This is a technology that is poised to transform the retail industry.

The possibility of using technology to transform business is one of the most powerful and compelling value propositions of the Adaptive Enterprise. Again, if you look at Adaptive Enterprise as a journey, this represents an evolution - from IT simply being a cost of doing business to IT becoming a strategic partner to the business. When this happens, business and IT become truly synchronized.

For an example, let me tell you about DreamWorks.

DreamWorks

The story of DreamWorks and HP is a good demonstration of what I mean by the "journey." It's about starting in one place, at a very basic level, then continually evolving and adapting until you end up at a much higher level.

In late 1999, DreamWorks was working on their biggest computer-animated film to date, a movie called "Shrek." The film was full of new things, cutting-edge things that required a lot of computing power. Very late in the production, DreamWorks decided to add even more visual complexity. And they needed more - a lot more - computing power to pull it off.

HP came in and provided an immediate technology solution. We provided them with enough power and efficiency to create what was, at the time, the most technically advanced animated film.

The story of "Shrek" has a very happy ending, of course. Not only was it enormously successful at the box office… it went on to win the very first Academy Award for Best Animated Feature.

By the time that production on "Shrek 2" began just a year or two later, the relationship had evolved greatly, to the point where DreamWorks and HP teams were working closely together on several breakthrough solutions to help keep DreamWorks on the leading edge of innovation.

One of these solutions was HP's Utility Rendering Service. "Shrek 2" utilized more than one million render hours on HP's URS. And it represented a significant milestone in the application of utility computing for HP. For DreamWorks, it once again gave them a needed boost in computing power, necessary to meet the creative ambitions of their film.

The HP Labs team was able to develop this technology platform - which provided scalable offsite rendering for DreamWorks - in less than 12 weeks, from concept to rendering "Shrek 2" frames. This is what we mean when we talk about an Adaptive Enterprise.

Another great example of the innovation that is happening in this partnership is the Virtual Studio Collaboration project. DreamWorks and HP are using technology to literally revolutionize the way that people work. But instead of me telling you this part of the story, it might be best for you to hear it directly from DreamWorks themselves. Can we view the video, please?

[Video plays]

When it was released, "Shrek 2" set a new benchmark as the most technically advanced animated movie to date. And, of course, it has now gone on to become the highest-grossing animated film of all time - and the fourth-highest grossing film of any kind, ever.

And now DreamWorks is poised to release "Shark Tale" on October 1, making them the first company ever to release two CG films in one year.

This is a story about a company doing something revolutionary - something that no other studio had ever done, in order to grow and compete - to release two CG movies in the same year. This is a story about a company using technology to help their business stay ahead. This is a story about business and IT synchronized to capitalize on change.

This is an example of using the Adaptive Enterprise model for computing as a service, where DreamWorks can draw on expanded computing resources when they need it most - with bullet-proof security - and without having to purchase or manage physical computing assets.

As far as the Virtual Studio Collaboration that DreamWorks talked about, within HP we are continuing to refine this technology. In fact, over the past year we have already dramatically reduced the cost of that capability. The Virtual Studio only costs one-quarter of what it did less than a year ago. And we're not finished yet.

In an Adaptive Enterprise, where business and IT are truly synchronized, IT can transform the way that business is done. But it can do even more. IT can create new revenue streams for the business.

Let me tell you about Starbucks.

Starbucks

Starbucks is the leading roaster, retailer and brand of specialty coffee in the world. It has nearly 8,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim.

Starbucks started out with HP by engaging with us as a traditional vendor. In other words, we helped them with computers to run their business. However, HP soon evolved into the preferred technology provider at Starbucks retail stores and corporate headquarters, helping them to increase their operational efficiencies. And as we began our journey together towards an Adaptive Enterprise, we started to have some exciting discussions about how to expand their business.

One innovation was the creation of Wi-Fi Internet "HotSpots." In August 2002, Starbucks partnered with HP and T-Mobile to offer wireless broadband Internet service. Today high-speed Wi-Fi Internet access is available at more than 3,100 Starbucks nationwide. And Starbucks continues to add value to the HotSpot experience in its stores by offering users access to exclusive entertainment content.

Now, keep in mind, Starbucks is still focused on delivering the very best cup of coffee to its customers. But what they've done with the Wi-Fi HotSpots is to enhance the overall Starbucks store experience for their customers. The result is that customers come into the coffeehouses more frequently, and they stay longer, primarily during off-peak hours.

But that's not all. Music has long been part of the Starbucks coffeehouse heritage. So, earlier this year, Starbucks and its Hear Music brand teamed with HP to introduce a new music offering for Starbucks customers.

Imagine being able to get your morning latté - handcrafted to your exacting specifications - while you discover and explore great music. Then you burn your favorite songs onto a CD that you can take away with you in minutes.

That is exactly what customers can do at the Hear Music Coffeehouse in Santa Monica. The Hear Music Coffeehouse blends the Starbucks store experience with a one-of-a-kind music store. Customers can discover, acquire and enjoy music in a completely new way. And while they're doing all of this, of course, they're enjoying Starbucks beverages.

Again, this is a story that's much easier to show than it is to tell. So let's take a look and see what this is all about.

[Video plays]

The first Hear Music Coffeehouse opened in Santa Monica, California, in March. Beginning this fall, Starbucks intends to offer similar CD-burning services to Starbucks stores in select U.S. markets, using breakthrough HP technologies.

HP powers the multimedia content and we continue to collaborate with Starbucks to create new and meaningful ways for customers to enjoy digital content. Together we're driving change in the distribution and consumption of entertainment.

There are many more stories that could be told, but hopefully you get the idea:

from UNICEF, where IT synchronized with the business in order to save lives,
from Procter & Gamble, where IT enabled the business to focus on its core strategies,
from DreamWorks, where IT enabled people to change the way that they do business,
and from Starbucks, where IT enabled the business to create new revenue streams.

Adaptive Enterprise

In all of these examples, IT has helped these companies to become simpler, more manageable and more adaptive enterprises. Business and IT synchronized to capitalize on change.

And that's only the beginning. As we continue to develop solutions for the Adaptive Enterprise, we are also helping customers to solve business problems that are unique to their industries.

As an example of our leadership in the network and service provider industry, we have expanded our long-term relationship with Motorola. I am pleased to announce today that our two companies have begun a multi-year agreement… HP will help Motorola to provide mobile operators with leading-edge, flexible and cost-effective telecom network infrastructure solutions. HP will deliver and support a complete hardware and software platform, one that will help manage key functions in the central call path of the network. These modular, standards-based platforms will enable Motorola customers to synchronize network resources to business need.

During the next several days, you will hear about many more innovations, solutions and announcements from HP and our partners.

We are making several exciting announcements in the area of virtualization - expanding these capabilities to multi-OS environments, including Linux and HP-UX 11i - the proven UNIX foundation for virtualization. We're introducing new offerings in both our AlphaServer and Integrity lines that deliver demonstrated business value to our customers.

In storage we're doing some very exciting things with the HP StorageWorks grid. This next-generation approach is pushing the boundaries of scalability and efficiency to new levels.

And of course, with HP-UX 11i, we've brought HP's award-winning availability, manageability, security and virtualization to both the HP 9000 and Integrity server lines. During the week you'll find more than a hundred demos and sessions around HP-UX 11i.

What's next? At HP, we believe that as technology evolves, every process will become digital, mobile, virtual, secure and personal. Digital music is just one example. Digital photography is another.

In order to help our customers through this evolution, HP has chosen to invest in focused innovation in four major areas: mobility, management, security and rich digital media. You heard about management from UNICEF. You heard about rich digital media from DreamWorks and Starbucks.

Our work in security and mobility is just as exciting. I'm sorry that I don't have more time just to tell you about all of that.

You'll hear more about security on Wednesday from Tony Redmond. As the head of HP's Security Program Office, Tony will talk about HP's approach to addressing the growing security threats that companies like yours are facing every day.

Before I close, I would like to share one more video with you. This demonstrates just a few of the amazing things that become possible when you take all of these innovations - in management, rich digital media, security and mobility - and put them together.

[Video plays]

Technology is changing so much and so fast. But at HP we believe that the best is yet to come. And the Adaptive Enterprise is just one way - but a very powerful way - that we're helping companies to make their own unique journeys and to capitalize on change.

If you only remember one thing from my presentation today, remember this: business and IT, synchronized to capitalize on change. That's what the Adaptive Enterprise is all about.

On behalf of everyone at HP, I hope you have a great week here in Chicago. Thank you, and enjoy the rest of the conference.