Trouble Down Under: Why HP CEO Meg Whitman Was in Australia Last Week
Hewlett-Packard CEO Meg Whitman was in Australia last week, partially on a mission to smooth over relations with a key client of its Enterprise Services business that suffered a technology disaster for which it blamed HP, sources familiar with the matter tell AllThingsD.
Yesterday, HP fired the head of its Enterprise Services unit, John Visentin, though the decision to let him go came before last week’s embarrassing service disruption that hit Commonwealth Bank, Australia’s largest bank, caused by a software upgrade gone awry.
Australian tech blog Delimiter published details of the problems said to have hit the bank. An operating system patch intended only for desktop PCs was pushed to server machines as well, causing service disruptions to many branches.
Commonwealth Bank has long been a client of EDS, the IT services firm that HP acquired in 2008. Sources confirm that Whitman, already in Australia on other business, went to meet with the bank’s CIO, Michael Harte, in the wake of the troubles in hopes of salvaging the relationship. Meanwhile, Oracle and IBM are eagerly seeking to make sure that HP doesn’t win its business back.
The disruption is about as ill-timed as could be. The bank has a six-year contract with EDS — and thus with HP — dating to 2006 that is up for renewal right about now. Its status is unclear.
Visentin, a former IBM general manager named last year to run HP Enterprise Services by former CEO Léo Apotheker, was let go yesterday because of ongoing problems at HP’s ES unit. And while the problems at Commonwealth Bank came after Whitman’s decision to replace him, sources say it’s an example of the sorts of problems that have plagued the troubled Enterprise Services group in recent months.
The unit has also had difficulty meeting its numbers. Though it’s hard to figure out exactly what’s going on because HP doesn’t break out ES results specifically, there are clues in the filings and public comments. The unit sits under the umbrella of the Services segment that reported about $36 billion in revenue last year. It combines two smaller units, the Application and Business Services group, and the Infrastructure Technology Outsourcing group, known internally at HP by their three-letter acronyms “ABS” and “ITO.”
For the first six months of this year, the overall Services segment reported $17.5 billion in sales, about flat from the year-ago period, though its earnings as a percentage of HP’s overall revenue has dropped from nearly 16 percent last year to about 11 percent this year. The worst performer of the bunch has been ITO, which last quarter saw its revenue drop 3 percent to $3.7 billion. CFO Cathie Lesjak attributed the drop to “being more selective” with the deals HP chooses to pursue.
Mike Nefkens, the senior vice president and general manager for ES in Europe, was named to run the unit on an interim basis, while Jean-Jacques “JJ” Charhon, the unit’s CFO, was promoted to its COO. Nefkens isn’t assumed to be Visentin’s replacement, and sources tell me that HP will be looking both inside and outside the company for the services unit’s next boss.
I said it yesterday and I’ll say it again today: Expect a lot more questions about, and a lot more attention on, HP’s services business in the weeks ahead.