Léo Apotheker: Will software salesman measure up as HP CEO?

Léo Apotheker, a software strategist, must lead hardware-maker HP into a new world of software services.

Hewlett-Packard has raised more than a few eyebrows with its pick for a new CEO: a sophisticated German-born Francophile now in charge of an American corporate icon founded in a garage.

On many levels, Léo Apotheker is a surprise pick by HP, which announced the appointment Thursday. As an executive and eventually CEO of German software giant SAP, he spent his career in software sales. HP is still mostly a hardware company, known for personal computers and printer cartridges.

Although successful in turning around SAP's US operations in 2002, Mr. Apotheker abruptly resigned this past February amid concerns that the company was foundering. At HP, he replaces a CEO whose company was succeeding swimmingly but whose personal missteps caused his downfall.

Nevertheless, as a signal of where HP wants to go, Thursday's announcement makes more sense. Following the lead of IBM, hardware companies are eager to develop a thriving software-services business. That industry could see explosive growth, especially if companies move to what's known as cloud computing.

In cloud computing, businesses don't own the computers that run all of their software. Rather, they buy software services from another company that not only takes care of tweaking and upgrading the programs, it owns and runs the computers, too. HP is already selling cloud computing services to corporations and experimenting with the idea of harnessing the computing power of disparate large-scale data centers and tying them together seamlessly.

To thrive, however, HP needs to become a much bigger player. Can Apotheker lead HP into that future?

“Léo has been a leader in anticipating the transformation taking place in our industry, and we believe he is uniquely positioned to help accelerate HP’s strategy," Robert Ryan, lead independent director of HP's board, said in a statement. “After more than two decades in the industry, he has a strong track record of driving technological innovation, building customer relationships and developing world-class teams.”

Apotheker hinted at his vision in an interview with the San Jose Mercury News: "Given what's happening in the tech industry, software of course is going to be very important" to HP.

He wouldn't elaborate, but in previous interviews, he has laid out his personal vision.

"I believe business is going to be fundamentally different five years from now," he told Charlie Rose in a televised interview in January 2009. "We will see more and more of these business networks coming together. They will be loosely coupled. They will need interactivity among themselves.... That network needs to function as one virtual entity."

In April, Apotheker became a board member of GT Nexus, a cloud-computing company based in Oakland, Calif., that specializes in trade and logistics. In July, when he announced he was starting a private equity fund to invest in technology-related firms in Europe, he said in a Bloomberg News interview: “The architecture of the future will be a continuum of mutualized clouds, private clouds that companies will organize, and classical on-premise systems."

But, he added: “I’m not sure that incumbents are agile enough [in the software industry to take advantage of cloud computing]. When you’re the incumbent, you are fettered by your environment; the market forces, the shareholders, the financial markets are such that it’s hard to be very disruptive on yourself.”

That's an apt description of the challenge he now faces at HP.