Originally Posted By Steven Burke and Joseph F. Kovar on September 15, 2015 on CRN.com
Hewlett Packard Enterprise is laying off as many as 25,000 to 30,000 employees as it takes more than $2 billion in costs out of its $22.3 billion Enterprise Services organization.
Tim Stonesifer, who will become chief financial officer of Hewlett Packard Enterprise when it officially launches Nov. 1, told Wall Street analysts Tuesday that the job cuts will come even as HP Enterprise Services reshapes its workforce with some new hires to compete in the cloud services era.
“Over the past several months, we have developed a clear plan to drive more cost reductions associated with the separation and specific to the Enterprise Services business,” said Stonesifer. He said the new Fortune 50 company has uncovered an additional $700 million in cost reductions including a shutdown of some certain offices and reductions in some parts of the Hewlett Packard Enterprise portfolio.
Hewlett Packard Enterprise restructuring activities will take $2.7 billion in annual costs out of the business.
“As we have done in the past four years, we are going to continue our focus on cost across the entire organization,” said Stonesifer. “We are going to continue to focus on supply-chain productivity and maintain a disciplined approach on discretionary spend and reshaping the workforce.”
Stonesifer also provided the first financial outlook for Hewlett Packard Enterprise, telling analysts to expect fiscal 2016 year-over-year sales growth in constant currency, driven by strength in servers, storage and networking. He predicted a stabilization of the services and software businesses.
Hewlett Packard Enterprise expects to deliver fiscal year 2016 non-GAAP-diluted net earnings per share of $1.85-$1.95 and GAAP-diluted net earnings per share of 75 cents to 85 cents.
The HP Enterprise Services job cuts come on top of the 55,000 job cuts that HP has already taken under a restructuring plan that began three years ago. HP has said in a Securities and Exchange Commission filing that it expects the new enterprise business to have 252,000 employees.
The seeds of HP’s enterprise services infrastructure outsourcing troubles were sown seven years ago, when HP then-CEO Mark Hurd, now CEO of HP rival Oracle, signed off on the $13.9 billion HP acquisition of systems integration giant EDS.
[highlight type=”one”]Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 234 on the CRN 2015 Solution Provider 500, applauded the Enterprise Services cutbacks as long overdue.[/highlight]
[highlight type=”one”]”HP is right-sizing the organization to be more lean and nimble to compete in a market … where customers are demanding more agile IT,” he said. “The HP enterprise services organization has been too dense with too many overlays.”[highlight]
The job cuts come with Hewlett Packard Enterprise launching a new Enterprise Partner Ready program Nov. 1 with a services certification aimed at driving business outcomes. As part of that program, HP is allowing partners to sell and deliver transformational consulting engagements based on proven HP Enterprise Services methodology — something partners have not had access to in the past.
Most HP partners seldom compete with or work with HP Enterprise Services, said Rich Baldwin, chief information officer and chief strategy officer at Nth Generation Computing, a San Diego-based solution provider and longtime HP channel partner.
“HP ES mostly works with Fortune 100 companies,” Baldwin told CRN. “They’re not in the same league as the vast majority of partners. They are used to dealing with $50 million or $100 million contracts.”
Anything that makes HP more profitable and more agile is good for channel partners and customers, Baldwin said.
Those employees being laid off, Baldwin said, will most likely need to get retrained for new careers, such as data scientists, a field experiencing growing demand in a big-data-analytics-driven market, he said.
“A lot of the people being let go have skills that may not be in demand,” he said. “The industry is moving from a focus on structured data to unstructured data, or to big data. And many apps are moving to become Web-based apps. Think of accounting moving to Workday. Every major software vendor is moving their apps to [Software-as-a-Service].”