Your strategy sounds more like Compaq's than to EMCs. So please distinguish your strategy from Compaq's.
Many vendors have recognized that the new age of storage is completely networked storage, managed centrally, vendor agnostic. So you'll hear many of the same messages from both companies but the winners will be the ones who can execute. Unlike Compaq and Sun, we have the Internet Protocol engineering and networking division in house as well as network management software.
Openview is a product that's already populated, shipping and ready to manage the network. So we've got different intellectual property. Unlike Compaq, we have a nice high end in our XP product and unlike IBM, we have a nice midrange in our modular network storage, whereas IBM and Compaq had to partner together to provide those things. You have 8.6% market share in externally attached disk storage in the 2000 IDC numbers. Where do you want to be next year at this time?
Ultimately, we would like to be number 1. And if you look at the IDC numbers in revenue, with just a little bit of pressure we've gone from number six to number three, passing some pretty formidable players. I don't think Carly [Fiorina] would be in this if we were aiming for anything less than number one. Just like lot of people didn't think we could be number one in printers or PCs and we did it. Storage is being treated within HP as the same thing. But you're partnered with Hitachi on the high end, though, correct?
We have an OEM model where we take a basic array engine to which we add thousands of lines of code. Much like the Canon engineers we sell for our LaserJets, we differentiate our printers from Canon's with our intellectual property. Gartner has ranked our XP products ahead of everyone except EMC at the high end. In software terms, it's our own product. So you don't plan to get into high-end engines?
No. We think that over time it will be scalable, modular networked storage devices that are linked together. OpenView is strategic to you. Can you be more specific about timeframes and specifics for integrating storage features?
You'll see announcements at the beginning of this year that start to leverage not only Openview but a full set of networking switches. We're excited about our policy management software, quality of service software and network management software because storage is headed toward software and the network. But you have to have a fabric and infrastructure. You'll see HP being very strong in this space.
For the hundreds of thousands of trained OpenView users, storage objects will begin to appear on their consoles. So using the same drag-and-drop capability, they can manage your storage objects. This allows network administrators to do capacity planning, logical unit management and other functions the same way they do with networks. So will the network administrator be the key person in storage management?
OpenView opens you up to having the existing network administrator do many storage-specific things. This opens storage management up to hundreds of thousands of network managers. HP has been under financial pressure of late. How do you combat the perception that HP may scale back or spin off the storage business?
I haven't heard that. What I've heard is that customers trust our products. We just went from number six to number three in storage, so customers are still buying our products. The economy is soft right now, but I don't think there's any worry that HP isn't serious about this business long-term. Merrill Lynch's CTO, John McKinley, was quite critical this morning of the standards wars in storage. What can you do to bring some clarity to that for customers?
We will support all the major standards. We are going through a classic early market. There will be competing camps and some standards will move faster than others. If this were a ballgame, we'd be in the second inning. We don't want to bet on which standards will win. So we'll play them all. There's been a lot of talk at this conference about a storage operating system. Is what you're talking about?
The operating system is getting disaggregated. So just like the mainframe was distributed and pieces scattered over the network, I think the same thing will happen. It used to be that the operating system, file manager, volume manager and cabling was all self-contained. In the networked environment, software will route requests that do failover and replication without involving the host. The CPU was never meant for data transfer. You will see a storage operating system doing that. You've said your goal is to make storage management people 10 times more productive. Realistically, when can you get to that kind of scale?
Storage used to be pretty passive; people had to manage it. Now storage can give you advice on what to do. Using the OpenView policy manager, for example, you can monitor your laptop drive to see if it is emitting a lot of soft errors, which is a pretty safe bet it's going to crash. So you can go swap hard drives before they crash. It's much less labor-intensive to be proactive than reactive. You are still in the network business, which most systems companies have exited. It seems like you're trying to be a lot of things to a lot of people. Do you have too many balls in the air?
We have combined all the storage under one profit-and-loss statement and we're in many segments of the market but we're not the HP of old that's trying to invent every piece. We will partner and acquire as it makes sense. Customers like being able to get disk, tape, optical and networking from the same vendor. But we produce or acquire them differently. What share of your investment dollars are going into software versus hardware engineering?
More than half, and closer to three-quarters are going into software. Our strategy centers around software. We view storage hardware as a distribution mechanism for storage software and firmware.
The value to customers is in software. We're not going to differentiate on cooling and power supplies. We believe customers will take more of our hardware integrated with our software. Look at Cisco: while other companies have switches, Cisco has the Internet Operating System integrated with it. That's why people buy Cisco. What percentage of your sales are into HP-only shops as opposed to multi-vendor shops?
Storage is becoming a separate decision. So 61% of our external disks units are separated from HP servers. One of our largest accounts is all [IBM] AIX. They have 22 of our high-end boxes and no HP-UX in that account. Do you ever envision HP moving into the outsourced storage market?
Storage service providers are our biggest customers right now and we've made a strategic decision not to compete with them. Would it ever change? You never say never. But there are no plans to do that.