Connectivity is as essential as water and electricity: HPE CEO
If the COVID-19 pandemic has reminded us of anything, the digital divide in the United States is alive and well...and very unfortunate.
Want to see that divide between the haves and have nots in society in real-time? Venture over to a McDonald’s parking lot right now, where you may see people camped out trying to access the fast-food chain’s free high-speed WiFi to get work or schoolwork done. That’s a very different experience than someone still with a well-paying job waking up in the morning, having a Starbucks latte delivered to them while they pound out work at home on the high-speed broadband that costs them $150 a month.
Talk to tech heavyweights and long-time friends John Chambers (former Cisco CEO and JC2 Ventures founder) and Antonio Neri (current Hewlett Packard Enterprise CEO), and they both agree there is opportunity at hand — born from the pandemic — to close the digital divide in tech.
“The way I think about it is very simple. You know, 100, 150 years ago we said everybody should get access to water, electricity. To me, connectivity is an essential service today. We have to think the same way, you know? And everybody needs to get access because, if you don't, you're left behind,” Neri tells Yahoo Finance.
Adds Chambers, “I think you need a national digital policy. And whether you're a Democrat or Republican or Independent, we ought to be pushing all of our leaders for a digital architecture as a country and say how do we become the most advanced in providing that to all of our citizens.”
Yahoo Finance talked at length with Chambers and Neri about the path forward for the economy, companies and individuals in the wake of the COVID-19 pandemic. What follows is an edited and condensed version of that interview.
Brian Sozzi: When we last talked in March at our studios, you said the world would be dealing with the challenges from the pandemic for 12 to 18 months. That timeline surprised me because I have always known you to be a sunny, upbeat guy. But you have been proven right. What do you see on the horizon now?
John Chambers: Well, I've been through six economic downturns now. They always last longer than you think and are deeper than you'd think. You hope for the optimistic, but you prepare for the challenges. When we said it would last well into 2021, you and I both hoped it was wrong. But, unfortunately, it turned out to be very accurate. And I think the businesses who positioned their companies that way and the startups who positioned their companies with that A, B, and C planning came through it well.
I think that's pretty much where we are. I think we're optimistic that you'll see a turn up in terms of the virus capability with therapeutical drugs and hopefully a vaccine by the end of the year. But when we surveyed the CIOs — and I've seen the surveys — most of them now believe it will be 12 to 24 months impact, which means that's what their spending patterns will be as well. So, unfortunately, I think it's playing out to be a little bit longer.
Sozzi: Antonio, John doesn't have that P&L statement anymore or those earnings calls, but you very much do. What do you see in your business right now?
Antonio Neri: Well, first of all, obviously we are going through this pandemic which is creating an enormous amount of uncertainty in the marketplace and obviously a huge impact to the society as a whole. Our approach was first to protect our employees, giving them the tools to work from home and make sure they are safe. The first half of 2020 was all about the disruption in the supply chain. And now, obviously, it's going to be all about what we see in the demand in the marketplace.
But I will say, so far, that my business has been steady with ups and downs where we see significant pockets of strength in areas where the customers understand they need to invest despite the pandemic. Things like the cloud experience is deployed everywhere. We're going to live in a much more distributed enterprise than ever before. The workforce of the future will change dramatically. And so that distributed model needs to be supported by technologies that accelerate the digital transformation.
So anything associated with virtual desktop, connectivity, obviously security, we see significant strength. And the other area where we see significant strength is also data, data analytics, because obviously, when you go through the pandemic — and I refer to this in my blog in the World Economic Forum — you know, it was crazy that people were just sharing data through spreadsheets. And we have an enormous amount of data. And we need to extract every possible value from that data.
So that's what we see at this point in time. But obviously it's going to be dependent to exactly what John said, what the recovery looks like. We subscribe to a U-shaped recovery. The question is how far the two sides of the U is and how deep the U is.
Chambers: Another interesting point here is that Antonio and I have worked together very closely on strategic partnerships. And I think that's a trend for the future with large, high-tech companies partnering with startups, both innovating faster together than either one can do by themselves. But, out of the 18 startups I've invested in, all of them level it out on their business and now are slowly starting up. So, if things continue, that's a very positive trend for the future while several of them were in free-fall in March and April, as you can imagine.
Sozzi: John it seems as though five years of tech innovation has been stuffed down the throats of many companies within three or four months. What does that mean for the next year in tech?
Chambers: Well I think it means a number of things. First every company is going to become a digital tech company. Doesn't matter if you're manufacturing, banking, broadcast, etc. The speed is going to be accelerated dramatically on it. It also means that failure rates are going to be accelerated. So, you and I have talked about probably 40% of the Fortune 500 disappearing over the next decade. It's probably going to be closer to 50%.
And, unfortunately, you're going to see a number of those continue just in the next year or two. Same thing with startups. 70% will disappear over the next decade. You're probably going to see dramatic acceleration in the next year or two of startups failing as well.
But this is where the big companies who really survive break away, and that's why I like Antonio's strategy about the 5G moving to the edge. And it's where startups all of a sudden become the next Google or the next Facebook or the next Microsoft or the next HPE or Cisco within that. So it's a chance to break away. How well a company navigates through the downturns really determines their future more than how well they navigate through the upturns.
Sozzi: Antonio, you lead the World Economic Forum's CEO Champions Group on digital transformation, and you say in a new blog post the information age is in fact over. And now replacing that is the Great Reset. What is the Great Reset?
Neri: Well, the Great Reset is something that the World Economic Forum has been discussing now for the last few months. The pandemic has created a new normal. And, obviously, the mission of the World Economic Forum is to improve societies. And we as a company have a clear purpose in life, which is to advance the way people live and work. And so we need to take advantage of a very unfortunate event like the pandemic to reset how companies and governments and society work together and take advantage of the digital technologies that we have been developing for the last few years and accelerate that transition as quickly as possible.
At the same time, do it in a sustainable way. And then make sure we don't create that digital divide, because obviously, as we think about the events of the last couple of months, it's important that we do this in a very inclusive and democratic way. So, for us, I'm super proud to lead that CEO Champions Forum because there is a lot of thought leadership in the sense that there's a lot of capital to put to work. Obviously, to John's point, the startup plays a huge role. But also companies like us have a moral and leadership obligation to lead this big transformation.
Three years ago I said that the enterprise of the future will be edge-centric, cloud enabled, and data driven. Edge is where we live and work. Here we are. You're working from your home and talking to John and I on this call.
But the future is here and now. It's no longer the future, right? And in order to operate in this future, we have to really adopt these new technologies. And that's why we have not only a technology responsibility but also leadership responsibility.
Sozzi: John, Antonio mentions the digital divide, and I think one of the things that have really surfaced during the pandemic is that there are haves and have nots. We have people trying to use Wi-Fi from a McDonald's restaurant parking lot. Clearly, that's not OK. That's not right. So how do you close that divide?
Chambers: I think you need a national digital policy. And whether you're a Democrat or Republican or Independent, we ought to be pushing all of our leaders for a digital architecture as a country and say how do we become the most advanced in providing that to all of our citizens. We have to move the digital agenda like France and president Emmanuel Macron has done. And India has done remarkably well.
On the consumer confidence sideboard discussion, India was one of the most optimistic nations in the world in terms of their consumer confidence. And it ties back, in my opinion, largely to Prime Minister Modi's decision about a digital India, digital manufacturing, digital cities. And they have the best broadband architecture in the world. Probably seven times the capacity of the U.S. And it's one of the reasons they're navigating through these terrible challenges so effectively.
We need to do the same thing in this country where we think about 5G and we think about the best infrastructure for every person, regardless of their economic status, geographic location, etc. And we need to focus especially on the central part of the nation in the southeast with more startups, more digital architectures. So I'd like to see the governors do the same thing in terms of implementation and education, Not just K through 12 in this digital world, but also especially the universities focusing more on outcomes as opposed to specialization in a degree such as law or engineering.
Sozzi: You were part of George W. Bush's National Infrastructure Advisory Council. How would you advise potential President Joe Biden on infrastructure investing through the lens of tech?
Chambers: Whether it's either one of the political candidates, the Democrat or the Republican side, my advice would be the same. I think we need to write a press release for what we want to look like at the end of the next four years. We get very aggressive in terms of what that architecture looks like. We move back to not only being the most connected country in the world — which we were 10 years ago. And 10 years ago, we were the best startup country in the world. We were the most inclusive company in the world in terms of our GDP growth.
We need to set those very aggressive goals, and then we need to execute it. To Antonio's point, it needs to be business and government and the citizens working together where that new definition of capitalism is you get economic return for your shareholders, but you also really take into consideration the benefit to society you bring.
Sozzi: And Antonio how would you close that digital divide?
Neri: The way I think about it is very simple. You know, 100, 150 years ago we said everybody should get access to water, electricity. To me, connectivity is an essential service today. We have to think the same way, you know? And everybody needs to get access because, if you don't, you're left behind.
And so, in this digital economy, getting access to that secure connectivity is going to be essential like water and electricity. And so this is where John's point is we have to work together with the government and establish a long-term agenda where basically the policies are sustainable in the way we deliver these services, these essential services, to all citizens of the globe. And that, to me, is a way to close that digital divide that today we experience in many parts of the world, and even here in the United States for that matter.
Sozzi: Just hearing that sounds as though this is a civil rights issue in many respects.
Neri: I believe so. It is because when I was a student in electronics and 25 years ago, to me, getting access to books was through just making photocopies in my city. It was not available to me digitally and not even in hard copy for that matter. So it was a hard way to learn. And, now, we need to give our kids, our next generation, the opportunity to succeed in the future.
Sozzi: What does Corporate America look like post-pandemic?
Chambers: I think Corporate America post-pandemic is going to be very unique. I think the large companies will probably not add headcount over the next decade because of artificial intelligence and productivity growth. Hopefully Corporate America becomes a much more innovative Corporate America where the large companies work with the startups, where a lot of the young graduates from schools want to go to the startups. So I think Corporate America would be more innovative, will move faster in terms of the approach.
And I think the landscape, when you list the top companies five years from now and 10 years from now based on how they navigate through this, there are going to be a lot of names that you wouldn't even recognize today on that list, and some big names are going to be missing. So you disrupt or you get disrupted. I think those companies who don't move much faster to digital get left behind.
Sozzi: Antonio, what does HPE look like post pandemic? How do you transform your company inside of a pandemic which, in many respects, may be with us for the next three, four, five, 10 years?
Neri: We have been going through what I call the largest transformation in Corporate America. My predecessor took some bold moves to split the company and refocus the business in the areas where we can compete and win. And that was the foundation by which I took over, and we have been going through our own transformation to become the edge to cloud platform as a service company.
As I said earlier, right, the enterprise of the future will be way more distributed, so having that secure connectivity and bringing the cloud experience for all your apps and data is absolutely essential. And that's why I love the partnership with John's startup because we have a common vision and the technologies to deliver against our vision. So for us at HPE, we'll be a totally different company sustained by a clear purpose and corporate values that I'm really proud of because our corporate beliefs are four and very simple.
Number one, we believe in accelerating what is next. Number two, we believe in bold moves, and we are taking some bold decisions for the long term sustainable profitable growth of the company. Number three, in the power of yes we can. Putting the we before the I. And number four, being a force for good. And we sustain that with innovation and customer centricity.
And then, ultimately, you know reflecting the fact that Hewlett Packard Enterprise was the founder of Silicon Valley, and we can continue to play a significant role in driving those innovations customers need in the next decade. And to your point, I believe the next decade is all about the age of insight and more focus on delivering outcomes through the technology, not technology for the sake of technology.
Sozzi: I'd be remiss not to ask you, how are you feeling? You've recently battled COVID-19.
Neri: Thank you for asking. I'm feeling awesome. It has been an interesting experience, because obviously we all talk about the pandemic. But when you live it personally, it gives you a completely different perspective.
I went through the two week experience like everyone that's infected. You know, obviously you go through the faces of fever and body aches and some respiratory challenges. Although I didn't have those, but the good news is I have the antibodies so I'm somewhat protected in many ways. But, actually, for me this underscores how important it is to find the cure for these diseases.
And this is where HPE has made a significant contribution by making our high-performance computer systems and our AI solutions, as well as our patents. We made all our patents available to the research institutions to accelerate the cure, obviously, to the vaccine and therapeutic solutions in the meantime.
Sozzi: Thank you, John Chambers and Antonio Neri.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
