Chief Future Officer: Tarek Robbiati, HPE

about zetabytes. It's a near unimaginable explosion in data and companies just don't know how to manage and secure all this new information. There's also a growth in the nature and location of data as well, you know, expanding beyond structured data unstructured data. We're looking at five hundred plus billion in revenue in the market that several years ago or a decade ago didn't really exist, and that's going to three acts through one point by trillion. And are

there room for more players? And what has spent on already pretty competitive space. What you see right now is that the big players are the biggest names in tech. You have the hemous like Microsoft, Google, Amazon is the big three. But the great thing about cloud and the public clouds the private clouds is that it allows a lot of innovation to happen. HP is a big name tech company with a mission to innovate and compete in the cloud. CEO Antonio Nari told Romaine Bostick why he

chokes Turk Robrioti CFO to drive this transformation. When you play sports, you want different type of skills and capacities in many ways that they all together can deliver a better performance. And it starts by will to win. And when I became CEO, I realized I need a different type of CFO. Someone is way more strategic, not just on the accounting side, but I really think about how we can deliver the value in a different way. Are

the days where the CFO is just as scorekeeper. I think our role as CFOs is to be the person who assists. The CEO changed the score well he had that attracted me was about the transformation experience obviously has more than two decades as a as a global leader. We're both in taliens by the way the core, which I think is a benefit that we can communicate the same and we can argue against each other, but always

in a constructive way. As CFO, um I would assume that you're always in a position where sometimes you have to say no to him? Do you say no to him? Ultimately, decision making ownership is he's He's the CEO of the company. Here's the boss. Is my boss. At the same time, I want to make sure that I watched his back. Turk Robrioti is hp s chief financial officer and also oversees the company's strategic function. Being the head of Strategy, he does a lot of the mad scanning looking at

the trends. Uh, you know whether it's three or five TI years. And that's why we combine both the CFO with the head of strategy because in the end has to deverstion holder value and then we gone into what are the big trends were to play and have to win. Think about it this way, we are like biologists. We need to deeply understand the financial DNA of our company and we need to take the practice steps that prevented it from aging. Finance is the lifelood of any organization.

Just like for a human being, you have to have your heart functioning. We have to be there providing the information that allows us to continue to create value for our shareholders and making sure that our customers get what they want. The Hewlett Packard Corporations split into two separate companies. Eight P Inc. Primarily makes devices from desktop and laptop computers to printers, tablets, and point of sales systems. Hewlett

Packard Enterprise, or HP, provides information technology solutions. In CEO Antonio Nary announced that the company would pivot from a focus on servers and on site storage systems to its cloud software as a service platform, green Lake. HP calls it a hybrid cloud platform, not just storing data in

the cloud, but managing it across myriad locations. When I became CEO in two thousand eighteen, I said that the enterprise of the future will be edge centric, meaning where we live, where we work, cloud enabled, in data driven. And one of the things that we saw through the pandemics that the enterprise became way more distributed, people working everywhere, and at the same time data became the most important

asset that customers have explained for a second. The difference between the edge there why that is sort of more useful and the idea of a more centralized sort of cloud system that I thought a lot of companies, at least at one point, we're embracing it well, if you think about we live now in a hyper connected world. Everything is connected. To digitize your enterprise, you need to be connected. Is cheaper to move the cloud to the data and by the way, more secure then moving data

to the cloud. And that's where we as a company, we're creating the capability to consume cloud services at the edge in your data center on a bigger cloud. There was a view and there still is that view that the whole world is going to move to the public cloud. We think the world is fundamentally going to be hybrid. The edge is where everything happens, is where people generate

data or company generate data. Think about, for example, logistics companies, how much data is being generated in harbors, in railroads, in warehouses and the world we're living we'll be a world which will be much more automated than ever before. So warehouses are going to fundamentally change. They're going to be powered by robots. Those robots will be very quickly picking up the items in the warehouse that are required

and then reshuffle what's in the warehouse. That actual processing requires data analysis locally where the action happens, transmission of that data or a secure network onto a central point or multiple central points for that matter, and made sense of right. So that is the whole, the whole idea that we're after. With more data to organize in more places, businesses are moving swiftly to digitize their information infrastructure. Corporate spending on it sword in and even if global growth slows,

that trend is not likely to reverse. How do you operate that environment If we are facing recessionary headwinds. Where we're seeing with I T spending is we're expecting flattening to single digit growth. But cloud computing will largely be unaffected by that. Given the explosive nature of data, organizations simply need cloud. Companies that once invested heavily in devices and data center servers may now seek more flexibility from

software that can be upgraded as new needs arise. That's the bad HP is making as it pivots to software as a service. When you hear the word as a service, so many companies throw that out. Something as a service? Is that just a buzzword? At the core, it's a different business model. At the heart of it, there is this contract with a service level agreement that ties the

two parties for a specific solution. The solution allows the customer to manage the infrastructure and secure specific business outcome under certain performance conditions. We manage infrastructure on your behalf. We grow and expanded infrastructure as your need to grow and expand in turn, and so the degree of customer intimacy is a quantum leap above the transactional world. With a different business model comes a different metric for measuring success.

Annualized run rate or a r R has become the focus for Touric Robrioti and his finance team. The R is critically important. The RR is actually measuring the amount of our revenue that is locked in and recurring with our customer base, and to the extent that they are r R is going fast. The more robust the future of the company is. Then on green Lake. We have

to grow customers. We have to grow the revenue we make from those customers, and the r R is the annualized run rate of revenue that you have from one period to the next. If your offer has a perennial future, it translates into a growing er. This is the way for us to truly understand that we remain relevant for our customers over the long term. What about margins. When you hear from some of these analysts, these investors here, there's still dialed in on gross margin some of the

more traditional metrics. Gross margin for me is the most important metrics in our sector right. It's fundamentally if you think about our our business, which comes from a hardware heritage moving into as a service with hardware commoditizing, you have to have a focus on gross margins. And as you can see from our results over the past nine ten quarters, our gross margins have been expanding very very solidly. That actually tells you that your customers are willing to

pay a premium for what you have to offer. And so what you want to see is a combination of a r R with gross margin expansion and the are are composition becoming richer and richer with more differentiation thanks to software. That's the journey that we are all. You need to remind people that of our profits are a deer, which means we don't need the imperiate profit to deliver.

So that's an opportunity because we have an amazing profit pool called hp point x now being supplemented with hpgree Lake, which we already have more than six billion dollars in the balance sheet, growing at the hundred plus percent of record. Supply change challenges and geopolitical turmoil have weight on earnings in two but with demand for its software continuing to grow and a record breaking backlog of orders, HP has

caused for optimism. Meanwhile, Surgeon Inflation remains a wild card is the company tries to attract subscribers and maintain margins. We have had to think about inflation permeating across what we do, in what we purchase and whether it's goods or services. We've seen rising costs. We had to therefore

be much more disciplined on pricing than ever before. This is not easy, and this is also something that has to adjust because you can keep pricing increasing all the time, so you've got to be very dynamic in the way you think about pricing. Moving forward, HP chief financial Officer Tarik Robriotti originally trained as a scientist, earning a master's degree in nuclear physics and electronics. He told Romane Bostick

how those studies set him on his professional path. It did prepare me in terms of my analytical capabilities, but there was a moment in my career where I felt he was really important that I hold my financial skills, and then eventually I had to do an MBA majoring in finance and strategic analysis and entrepreneurship. I discovered finance as a discipline. I loved it and ever since then

I became a finance person. Highlights from Robiotti's resume include a stint with Lehman Brothers in London and later experiences CEO, first with the telecommunications firm CSL in Hong Kong and then with Australian financial services company Flexi Group. He came to the US to serve as cfo it's sprint, leading the company's turnaround efforts. That was very lucky. I had the opportunity to work in Europe, Um, Australia, New Zing, and Asia in the United States, so I'm truly a

global citizens. People ask me where at home. I answer to that question is home is where I'm not. Home for HP is now just outside Houston, Texas, where the company opened its new global headquarters this spring. For CEO Antonio Nary. The campus is a passion project. I love design, I love art, and I felt this was a unique opportunity for me to start with a blank sheet of paper.

This was a piece of Latin nothing. There was nothing here and it's a remarkable In two years were able to build these five hundred thousand square feet side with a unique experience digitally enabled in everything we do. HP has an abandoned Silicon Valley. A number of employees and business units remain based in the Bay Are Yeah, but nary in Roboti believe the expanded presence in Texas strengthens

the company operationally, financially and culturally. We felt that we have a lot of opportunity to streamline and make the company were more efficient. The reason to move here is to get the best of both words. Having a presence hid in Texas allows us to recruit and retain talent, particularly on the diverse side of the house. People don't realize that Houston, Texas is the most diverse city in

the United States. In this side, we have a twenty five megawatts data center where a lot of the development gets done from all over the world. The energy costs is significant cheaper here than California. I will now be able to sustain that in California. What we're seeing in a more macro environment is that corporations are looking at locations that have a healthier business environment from taxation regulation. They're looking for places that they can find new talent

anti talent is scarce. What we're finding is that access to talent is still the biggest bobbleneck to productivity, and so companies on an increasing basis, whether it's Texas or other places in the United States or even globally, are working more towards this hub and spoke model where they might have a center of excellence or or a hub in one individual city outside of the main headquarters. And increasingly we're finding that is happening outside of Silicon Valley.

It was a big decision, but it actually if you put it in the context as to why we made the decision, it actually made sense. So we had a longstanding presence here in Houston for the past i would

say twenty some years since the Compact merger. We bought a piece of land, we started building this building, and in doing so, we had to also recalibrate how we were building it because the pandemic hit us, and we thought about recreating a work environment that is very, very different, that is catered for this new structural way of working, which we call edge to office where people don't always come to the office to work, can work remotely from their homes, their edges, but have to come back to

the office for specific reasons such as team meetings, customer meetings, and in general collaboration. With regards to the hybrid work model, do you see that's something as something that will persist longer term when the pandemic is long gone. Yes, no question, this will persist. And I think we are witnessing right now a societal change in the way we work are You're no longer going to measure productivity in the same way as in the past. You're gonna be focusing on outputs.

Never mind what people do in their private times. It doesn't really matter to a company as long as the output appears there. HP launched its edge to office hybrid work initiative in the fall of the new campus is

designed without flexible model in mind. We have to admit that the pandemic has had its toll on mental health in the workforce across the world, and so it's really incumbent on us employers to make sure that we create an environment where our employees feel at ease to come to work, they feel supported and That's why we created the environment that you see between this the indoor with

two amazing builders and our door amenities. We have a truly um you know, experience for their employees that they can host customers, they can innovate, they can collab, what they can socialize, and we have so many events. And I will say the one difference between here in California, this is way more community driven. So we have a lot of events here like the famous chili cook event. HPS annual Chili cook Off allows hard Grobrioty to indulge in one of his favorite hobbies. The finance chief is

also an average chef. Cooking has a lot of parallels with finance and being a CFO. There's a lot of indirect satisfaction. You know, you you only you only know that you're doing a good job when you see other people recognizing it. And there's nothing better than when you serve a nice meal to your friends or family who come over. I'd love to do that. It's hard work,

but it's nice. As HPE moves forward with its strategy to deliver software as a service and gain subscribers on the green Lake platform, it's growth and customer demand is encouraging, but supply chain disruptions have slowed the company's ability to fulfill those orders. It's a problem that's plagued many industries since the onset of the pandemic, compounded by the war in Ukraine. Nobody, including HP is going to have an

easy time with the supply chain. I mean, we started the just in time concept in the seventies and it's taking years for organizations to back their way out of that and find a more distributed supplier based and more local supplier. Taric Robioti can't wave a wand and clear the backlog all at once, he told Romaine Bostick. He's focused on long term solutions. The world is no longer flat and that's the practical reality we have to reckon.

And in that context, therefore, it's really important that we get closed to where our customers are, and so we have to rethink our network of manufacturing plants. We have to rethink our network of our suppliers, and I think the whole world and the whole ITEA industry has to find a new equilibrium with supply chains that are designed for speed, resiliency, and costs as opposed to just be

inefficient and designed around cost. Our goal is to create a supply chain that is very much designed for optimal visibility at every point in time of where components are, where the working progress products are, and have the ability to shift production and materials in different continents where we operate. So, for example, we invested in a manufacturing plant in the Czech Republic because it made a lot of sense for us to have a presence in Europe. This is really

a new reality that we have to navigate. It's not like we went backwards and capacity. In fact, capacity has been added. The issues that demand has outpays any capacity that we ever imagined, so now we need to add capacity. Also, we need to transition some of the technology just to the um notes and that takes time. Turk Roboti will play a key role for HP as it retools to face new challenges. Romane Bostick asked him what skills the CFO needs to truly succeed is the chief Future officer?

The first quality you need to look for a CFO. It's almost able stakes, right, It's integrity, and it's not about being honest or or dishonest. Of course we're all honest, but it's integrity. Of thought in the way you present the fact base, which is the data. If you don't have that in a CFO, stop looking move on right. That's the first and foremost thing. The second most important thing is the ability to be strategically agile. It's absolutely critical to be injecting in the work. That is CFO

performs strategic thinking. The third I would say, if you think about it in these terms, we are a little bit the stewards of the resources of the company. For the company and for the CEO, we've got to make sure that resource allocation is up to scratch and that we are allogating resources where there is the biggest return possible.

And finally, we also have to be coaches. We have to coach our colleagues and team members, and my job, the way I think about it is we have to shine the spotlight on their strength but also at the same time make sure that we understand our weaknesses and are clear about the areas that we need to improve. So a lot of the CFO job is to distill what I simply would say is tough love. It's about being tough right matters, and also be encouraging in other circumstances.

What's the opportunity here for HP over the next ten years. The opportunity for HP over over the next ten years is to redefine the industry. And because we firmly betive with Antonio that the future of the industry is extra cloud and I think that there will be a growing acceptance and it starts already. You have evidence of it that the future is hybrid and that the future of an enterprise is to become essentially a digital service provider.

The pandemic has taught us that the enterprises who formed the best during that period, we're the ones who have digitized their business models. And for an enterprise to digitize their business models, they have to think about it edge to cloud and where the company to help them doing. So, what do you think is going to be the main challenge for HP over the next ten years. Well, I

would say the main challenges ourselves. We have to really be recognizing that the opportunity is there for the taking and we have to go after it resolutely and and fact we can't really wait, be complacent and not execute aggressively to capture the opportunity. So it's not to us really and we think with with the right focus and with the right team, we can get there. How do you expect your role as CFO to change over the next ten years. My role is constantly in change mode.

If you start with a view that the world is in constant change and you have to adapt, you have to anticipate on what comes next, strategic thinking is vague. He for that purpose, you also have to make sure that your team is geared towards it, that you understand the demands that this constant change puts on the team. And then you also have to continue to polish your stamina, build a grid that you need to continue to navigate

the journey. For someone who maybe got promoted to CFO today, what would you tell them, just for the first day on the job. What's the best advice you can give them? Enjoy it. It's wonderful. You have a unique vantage point in any company to truly understand what's going on. No one else in the company has access to the data that tells you what's going on. Have fun for Romaine Bostick, I'm Taylor Regg's. This is Bloomberg