Online Extra: The Livermore Way at HP

Ann Livermore has her Technology Solutions Group humming -- by going back to basics and by bringing in more sales executives for her team

The first impression one gets of Hewlett-Packard (HPQ ) Executive Vice-President Ann M. Livermore is one of calm gentility. The North Carolina native is quick to smile, slow to anger, and universally well-liked inside HP for her ability to listen -- and hear -- other people's ideas.

But don't let the southern charm fool you. Livermore didn't get to the helm of HP's $33 billion corporate computing unit just by being nice. She's also a lifelong overachiever who earned a 4.0 GPA during college and who rose to become chief of HP's huge computer services arm by her mid-30s. When advisers told her she needed to raise her profile to have a shot at the CEO title that ultimately went to Carleton S. Fiorina in 1999, Livermore hired an HP publicist. The pair launched a project "Dark Horse" to get her in the running. While she didn't get that post, she has managed to consolidate her authority during the tumultuous five years that followed, which included the landmark purchase of Compaq Computer in 2001.

She's showing no signs of slowing, despite having undergone a kidney transplant this summer. While she's visibly thinner, "she's at full power," says HP Labs chief Richard Lampman. "These days there's only one setting on her power meter." Says another high-ranking insider: "I've rarely, if ever, seen her performing better, nor having a better grasp of her businesses. She appears more healthy and energetic than in years. She's young and on a roll."

What's got her jazzed? Her Technology Solutions Group, after years of merging the operations of HP and Compaq, is finally clicking on all cylinders. Here are excerpts from interviews and e-mail exchanges with BusinessWeek computer editor Peter Burrows.

It's been quite a year for TSG. HP investors know that your unit has helped boost the stock more than 50% in the past year. But in talking to customers and partners, it also seems HP is being valued for the characteristics it used to be known for in its glory days -- in particular, for being reliable.

I think that's' right. And I think it's because we got back to basics. Over the last 18 months we've gone from throwing Hail Mary passes to blocking and tackling. That's what great companies do.

What kind of Hail Marys were you throwing?

A Hail Mary is having it be two weeks before the end of the quarter, and you still have a long way to go to meet your revenue goal. Well, I'm too old to spend the last two weeks of every quarter staring at the ceiling, wondering how the quarter is going to end. So we're incenting our sales organization to close deals on a more regular basis, and not letting customers believe that if they wait until the last week of the quarter, the price will be better.

Some analysts have expressed concerns that some of the huge outsourcing deals announced during Carly Fiorina's tenure as CEO might not be profitable, and might end up being problem deals, such as the deal EDS struck with the Navy a few years back.

We knew what were doing with each of those deals. We've certainly learned some things we'd have done differently. But if we turned back the clock, we'd have closed every one of those big managed services deals. You need critical mass to get started [in a new business]. So those first few really big deals -- with CIBC, with [Proctor & Gamble] (PG ), with Ericsson (ERICY ), and with the Bank of Ireland (IRE ) -- were critical for us to build credibility and get economies of scale. Just as EDS got started a million years ago with General Motors, we had to start somewhere.

It's well known that you made a run to get the CEO job that ultimately went to Fiorina in 1999, but I understand you supported most of her big moves and are still friendly with her -- even though you think Mark Hurd is the right CEO for HP at this point. Is that right?

That is fair. I see Carly once every few months. I think that the Compaq merger has positioned HP very well for the future. That was the big decision she made, and she was right to do it. Your comment on Mark is right. I think he is a great CEO.

It seems much of your work of late has been in terms of sales management, including bringing in a number of sales-oriented execs from outside the company. Why is that?

Our culture has always been very engineering oriented. That's a good thing -- but we need to balance it by bringing in more executives with sales backgrounds.

You've already promoted or hired some people with this résumé. Are the results becoming evident yet?

You can feel the change happening. There's a new energy about closing deals -- about hating to lose. It's easier for an engineer to analytically describe why you lost a deal. But sales managers are much more emotional about it. There's a different hunger. With a truly great sales executive, you can almost see the blood on their teeth.

You've said in industry events that you think IBM's decision to get out of the PC business will ultimately hurt its server business. Why is that?

I believe IBM has exposed itself on the low end of the server business. After all, a low-end server is really just a PC on its side -- and it's the biggest volume part of the server market. So you can't tell me they're not exposed. [As IBM discovers that it's no longer getting the best volume discounts from components providers], are they really going to have the fortitude to keep a PC-style cost structure in this business? In fact, we're starting to see customers question IBM's commitment [to low-end servers]. We're going to use that to our advantage, big-time.

You've been at HP for 24 years, even though you were twice passed over for the CEO job. Why do you stay?

I have stayed at HP for several reasons. When I first joined, I worked for a man named Marc Hoff. He was proud that, of his services managers in the regions in the U.S., he had 25% that were women.

That was in the mid-80's. He was a fantastic businessman -- tough, but very progressive in terms of diversity. It made it easier for me to succeed at HP than at other tech companies in the 80's.

Every time I have been bored or tempted to leave HP, new opportunities have come up where I could learn from a new boss or work in some additional business area. And I believe we have the opportunity to make HP the leader in the IT industry. My businesses are at the heart of that opportunity.

And the operating model we now have puts all the key knobs and dials in the hands of my leadership team -- so we have the control, and the clear accountability, to make it happen. That has not been the case with some of the earlier configurations of the company.

So give me the new strategy in the nutshell, that shows how HP is different from IBM and others.

Our real value proposition is that there is no one better in the world at helping a customer design, implement, and then run their IT infrastructure. There are companies that are better at transforming business processes. There are companies that are better at writing applications. But there's nobody better at core technology IT services, and we have not proudly enough or loudly enough put that stake in the ground. Well, we're going to claim it, and make it really clear to everyone.

Edited by Peter Elstrom

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