AI Transformation: Shaping the Future of Computing

Patrick Moorhead:
Welcome back to the Six Five Summit 2024, where we are talking about making AI real for businesses and consumers, and of course, building all the infrastructure and devices that needed to support that. It is our modern work track opener, and unless you’ve been hiding under a rock, you can see that modern work is on fire. AI is the accelerant on top of that. I can’t imagine a better person to talk about this than Alex Cho who heads up HP’s personal systems group. Alex, welcome back to the show.

Alex Cho:
Thank you. It’s great to be back with you. I’m enjoying this.

Patrick Moorhead:
Absolutely. I do have to ask, can you tell us a little bit about that awesome background?

Alex Cho:
I’m glad you caught it. How could you miss it? No, actually, I was recently at our garage, the HP garage, and not just in the garage, but the house, and I had a chance to bring a partner there and walk around. And I personally was so inspired because it’s a reflection of where innovation and really so much of what we think of the compute industry grew from, and it’s been an inspiration for me and for our teams. And so I thought, why not come and talk to Pat with what’s driving that inspiration for our company?

Patrick Moorhead:
I love that. A lot of history and the great news. You’ve continued that in and I’ve talked about. I really do appreciate your approach starting with the end user in mind, starting with use cases, and also looking at what you do from a solutions standpoint and when it comes to AI, that’s as important as it’s ever been. But what I’d like to do is I’d like to start 50,000 foot here. What is the vision that you have for AI in personal systems group?

Alex Cho:
I’d say that when you look at what AI means for the world, for our customers, we are so excited because we believe that AI will enable us to deliver disruptive productivity. And we think that is just a massive opportunity, 10X productivity that we can unlock, unleash, deliver to our customers. What a huge contribution that would have, and also enable people to just do so much more and contribute so much more. And we think that we’re really at a great place to do that because you talk about knowledge worker?

Patrick Moorhead:
Yeah.

Alex Cho:
We’re already there with a knowledge worker. We have a huge portfolio of PCs, printers, room solutions. Now infuse AI into that to make all of those experiences that much more productive. We’re super excited. Our ambition on this is only growing the more that we get into this.

Patrick Moorhead:
We talked about this a couple of months back, but this does feel like an unprecedented time. You and I are both experienced, have seen a lot of things come and go, but how does this compare to you from other moments in technological history?

Alex Cho:
Think about, I call it the 1999 moment. When I put on the background screen, the other one is to put on Prince, but why? Because the internet was really a major milestone where we saw new customer experiences, business models, we saw innovation thrive, and it drove a decade of computing growth. I think this is another 1999 moment because AI and particularly what it means for the consumer is going to drive all these experiences, new value, new business models, another decade of growth. And for us, we think that’s a game changer. Again, it’s also happening faster. If you look at the data and the statistics, as you know, if you look how long it took for the first million people to use the internet or to use other services, our phones. The first million users to use ChatGPT was far faster, so this thing is also moving faster than anything else before.

Patrick Moorhead:
It does feel like a special moment. And I think I was a product manager doing internet PCs at the time, and it feels a whole lot like that. And what I’m really inspired about too is where the internet went up and the build out, it kind of crashed. It was called dot-bomb. And where I think this is different is I’m seeing benefits at the end user at a incredible pace. And you talked, I don’t know if you said 100X or 10X, but I’m seeing 10X improvement in employees. And I think shortly we could see some miracle experiences related to consumer, but that is the difference that gives me a lot of motivation. Let’s talk about the developer tool chain here.

Right now developers seem to be hit with this incredible amount of choices in where and how they do things. It’s like, hey, pick it on the client device, pick it on the cloud, but these things shall never be connected. It seems a little bit disjointed to me. And I’m curious, how are you addressing AI developers to increase their efficiency, increase their productivity?

Alex Cho:
One of the key areas that we think is going to fuel a lot of growth for us is really in addressing what you’re talking about. And what is every company… What is every company responding to because of what their board and their executive staff has asked them to do? And that is figure out how to use AI to drive productivity in my company or in our company. And for that, we see that the whole world of enabling data scientists to take models and customize and tune them and add in their own data to create meaningful productivity improvements in those companies, that is happening at a just unprecedented level and energy across the world. But for that, most data scientists today are operating in a world where it’s a little bit DIY. They need to find the right configuration to go do that. They’re trying to grab data in different places. They have different toolkits and tool sets that they’re using.

They need to make sure that they all work together and compatible. And by the way, this no longer is a hobby by one data scientist. You’ve got teams of data scientists that need to work together, and today there has not been a great way for them to collaborate. And in that space, what we have been delivering and building on is what we call AI creation center. It’s the world’s most comprehensive workstation based solution for AI development that allows data scientists to configure, pull in tools, test, have all their data mapped, and collaborate with other data scientists to dramatically improve their productivity so they can help their companies use AI to improve productivity. It’s a win upon win that we’re excited about.

Patrick Moorhead:
I appreciate you filling in the… I talked about the gap between the client and client computer and the cloud. And what I’m glad you pointed out is teams working together and being able to share maybe different modifications to frameworks, maybe some tweaks that they’ve made to a small or a medium-sized model or even the data workflow that they’re hitting. I’m really glad you pointed that out.

Alex Cho:
It really is, we talk about the word hybrid, hybrid workforce, which is obviously a huge trend. But in the world of AI, one of the things that we really believe in is that customers, data scientists, developers, they should be able to operate in hybrid environments. And that’s why our AI creation center enables people to work in cloud environments, local environments, share across them, not be constrained by one unique environment and do that together with other data scientists. For us, enabling that for velocity is really important.

Patrick Moorhead:
A lot of these industry transitions I think begs the question of, hey, where does this device or where this service, how does it change the role? I think I remember, was it 10 years ago the PC was dead and everything was going to be replaced by tablets and smartphones? Well, that didn’t happen. I knew it wasn’t going to happen and it didn’t happen. But some people were questioning it and then the pandemic hits and it’s like the PC is critical and the PC is vital. And that didn’t mean that we didn’t need tablets anymore. We didn’t need smartphones anymore. But I got to tell you, it did move the PC up the food chain of importance. And I’m curious, does this new generative AI wave change the relationship or the role the PC plays in our lives?

Alex Cho:
You’re right. That’s a great summary of some of the historical… I literally remember the email that I got that said the PC category is dead.

Patrick Moorhead:
Oh, MIT tech review, I have that meme and I pull it out about once every five years.

Alex Cho:
And then remember during the pandemic at that time when we’re watching the role of PC, we’re the ones who said the PC is essential. We want to be clear, it’s not dead, it’s essential.

Patrick Moorhead:
Well, Alex, I got to give you, I have to modify that, you said it before the pandemic and they were like, “Alex, you nailed this. How did you know this?”

Alex Cho:
And what we think we are entering into is with now AI, and it feels a little bit about back to the future, but it is probably a very good term, and that is the PC will become even more personal. And we use that. Obviously personal computers is what’s in the PC, but it’s really based on the truth, the product truth, that what AI enables is for this device to provide a far more yes, productive creative experience. But the hallmark of that is that it’s going to be more personalized. It will be catered to you, your preferences, your settings. It will take your data, it will create a reflection of what you have seen and done to date, and it becomes that much more personal.

And so this device that yes, has a lot of utility value, adds a new dimension because it becomes more personalized for you as it delivers more productivity and creativity. And in that way, this is exciting. And it’s not just slide ware, we’re seeing it happening as the world of ISVs are starting to take generative AI models, embed them into their applications for the value of doing it locally on the PC. And that is what just makes this the beginning of what I call the next decade.

Patrick Moorhead:
You got everybody excited here on the preview, a historical viewpoint, your strategic background and how you want to align to it. Let’s talk about some of the latest innovations that you brought out. You’ve already talked about the workstation, end-to-end development, solution that you have, but let’s talk about the others. And I know you love all your AI babies the same, but give us the highlights here.

Alex Cho:
Well, we are using the vacation to just, we are refreshing the entire portfolio of PCs that we have, and it’s including and starting with what we call the OmniBook X for our consumer line and our EliteBook Ultra for our commercial line. The other world’s most powerful and secure ultra mobile AI PCs. And the reason why that’s important for us is it’s enabling people to use all these new AI applications locally on the device. And local has so much value because it’s faster, it’s more cost-effective, it’s more private and secure. The other thing that’s important for us is that we’ve been able to use AI to optimize the device through a lot of first party models that we put on there to deliver unprecedented battery life.

Battery life, and I know we’ve had discussion in the past, this is real battery life for how people use their device, whether it’s video or collaboration and getting 26 hours of battery life. We’ve also infused into them what did we get when we acquired Poly? We acquired a lot of great audio and video capability and maybe more than AI, probably what impacts the knowledge worker is hybrid work. We’ve incorporated Poly Camera Pro that allows you to have the best in AI video experiences on that device because we know that’s the reality of how people work. A lot more in there, but this is more than just the next product in another year that the company announces this is the brave new generation of a class of devices that’s powered by our AI. And so we couldn’t be more excited really for the customer, the customer wins in all of this.

Patrick Moorhead:
You’ve interspersed in the conversation here, some of the end user benefits that the new class of AI PCs can bring. But if you had to pick the top three, what would be the top three customer benefits that comes from these?

Alex Cho:
First is, you will be able to do new things that you couldn’t do before. And I know there’s been a lot of discussion about, tell me what I couldn’t do on this existing set of PCs? You can do new things.

Patrick Moorhead:
By the way, I may have asked you that on a stage in January of this year.

Alex Cho:
You had that big white sweater, sea cabin sweater. I remember.

Patrick Moorhead:
Well, I know you wanted me to wear that today, but I got way too much shame, so I decided not to.

Alex Cho:
Well, you looked very comfortable. But that is the question and that is the inspiration, the motivation for what we’re doing that is customers can do things now that they couldn’t do before. A good example, and I think what Microsoft has been doing in championing is a great example. The ability to create using generative AI models locally on the device, it’s faster, you’re not paying for a subscription, it’s always there on your device. And I’m a stick figure kind of jar. I’m a big whiteboard flip chart person to take flip charts into immediate beautiful renderings that can be used and passed along. Couldn’t do that before. Didn’t matter if I spent more money on it, I just couldn’t do it before. I love that creativity and productivity element. The second thing that you can do on these devices is still, as much as we have worked on devices, there’s a lot of friction in them.

There are things that just make it more difficult a lot of times because you have drivers and configurations that are just not on sync. We’ve enabled and we’ve created our own AI models to optimize that device so that it is running more efficiently, it’s more effective, last longer. And if you have a problem, we can more efficiently get some resolution to that. Eliminating that friction might seem boring. I’ll tell you, for our customers, if you’re listening to them, they want net promoter scores to be improved by eliminating friction much better than it was before. And I love that we can do that. And then third thing, collaboration. The ability to do this thing, but to do it better, to see me better, track me faster, don’t compromise on battery life because I’m doing it through the CPU versus the NPU, to do it in a way that makes it look like I have a professional agency who is videotaping me or capturing me. I love that. These are the, couldn’t do before, not just a little bit better, but substantially different reasons why we’re so excited about this next generation.

Patrick Moorhead:
I’m glad you talked about collaboration and in May I saw a very provocative announcement from you and Google on Project Starline. Now, does Project Starline intersect with AI at all or is it independent of it?

Alex Cho:
Very much a part of the master plan, Pat. Think about, what did we say our vision is? It’s about enabling disruptive productivity. Number one is with companies who are working on customizing tuning models that they can be more productive. Number two is for people and how they work on their devices. And number three, it’s all about enabling AI to make what we call spaces and places more productive and connected companies, people and their devices and spaces and places. And this is why Poly the AI we’re driving and enabling through our Poly portfolio. We called it director AI, to give you a better experience. That’s why the partnership that we’ve announced and going really deeply with Google on leveraging and bringing Starline to life, which is all about AI, it’s all about taking data points and enabling that interface to be far more lifelike and intuitive. That’s all about bringing AI to enable people to be more productive, more creative, more connected. And again, we think it’s another step function improvement in how people will work and live.

Patrick Moorhead:
Alex, at any intersection that we’ve had of just where technology reshapes experiences, sometimes the bad guys use these technologies to come in and disrupt things. And we’ve seen it… We’ve seen that everywhere. We went from the mainframe to the mini computer and as we distributed that compute, there were challenges. Then we went to the PC and client server. It added challenges like security, the internet, and you could download things that could end up being Trojan horses, things like that, so how are you building security and trust into all of your AI portfolio?

Alex Cho:
And we think this is really only going to become more important for our customers. And secondly, built on something that, as you know, we have been investing in for a while. This didn’t start when we started to work on our AI PCs. This has been something that we have been investing in and continue to provide leadership in the industry, and that’s really our device security. What we have leveraged and continue to build on is our embedded security controller in what we call our Wolf security stack. Why is that important? AI is about data. It’s more than data. It’s about data, models, inferencing. And to all of that, we are leveraging not only our security stack, we introduced earlier in the year that the next generation of our security stack is the first out there to also protect against potential future quantum compute hacks.

That becomes the bedrock of how we’re enabling our new PCs because we want to make sure that not only with the new capability and processing and data and models that we step up how we protect that data models and all the inferencing that happens on there so that we can enable a more secured environment for our customers. We’re actually more passionate about this than ever because number one, all of that has historical capability is becoming more important, and B, for our customers, this is top of mind. We keep hearing about it, tell me what it means about AI being about data. Am I going to be protected? And so that’s where those two come together very well.

Patrick Moorhead:
The TLDR is that AI provides all of these beneficial technologies, some of the technologies, incremental ones that we haven’t seen before, like models, like saving interactions that we wouldn’t normally save on the PC, provide a target rich environment. And you’re using AI and addition to the other features that you brought in with Wolf. You had AI capabilities five years ago or more. I was at an event at New York when you rolled that out, so it’s good to see that you’re taking care of this.

Great conversation. I wanted to end here talking about sustainability and the amount of energy that AI takes. One example, Reston, Virginia, they don’t have any more power left on the grid for EVs, for people, for homes, there is none. And we’re looking at all of the power to do the training of these models in the data center. And while PCs aren’t sucking as much energy as these AI training clusters, it’s still important because they’re additive. We might sell 300 million of these in a year, so they’re additive. How are you factoring in energy and saving energy as you create your new devices and solutions?

Alex Cho:
Well, such an important part of this equation dialogue. And it really is, and I would say it’s in two segments. First is, many have said with all this AI, can’t I do it in the cloud? And why do I need an AI PC? One is the rationale as to why the AI PC has value in this whole space. And that is because when you run models locally, they’re going to be more energy efficient, it’s going to be more cost-efficient for the customer because of doing that locally versus going to the cloud and back. Now, the reality is it’s a hybrid compute environment, and you’re going to see increasingly from HP how we optimize and orchestrate against both. But that’s really the unique value of the AI PC and why we think as a category, there’s so much value to the AI PC because of the cost and energy, but also the latency benefits or the speed benefits and the privacy. The other goes back to what we have been talking about here for quite a bit of time, and that is, for us, it’s all about sustainability in our devices.

And a couple of years ago, we hit the magic hundreds, 100% of our devices. Every PC HP ships and display uses recycled material. 100% of the paper-based packaging has been moved to more sustainable sources. 100% of our PCs are EP gold, which is the highest rating around energy efficiency. That we are keeping up and actually continue to raise a bar with our AI PC. Not only does the definition of an AI PC become more efficient, how we deliver the AI PC has become more efficient. And so with our latest OmniBook X and EliteBook Ultra that I mentioned before, they’re both part of this most sustainable PC portfolio. 50% recycled aluminum in the A, C and D covers. I know you’re a PC guy, so you know what I’m talking about. That’s the top deck and the bottom. 50% post recycled material in the key caps. And then we go further speaker boxes, we’re using ocean bound plastics. We’re just re-hauling that entire thing to be the most sustainable device out there. And so we get energized by that.

Patrick Moorhead:
You have made some incredible progress and where people want to buy new devices, you’re breaking new ground on the environmental impact of that happening. I’m really glad you brought into the fact, and people aren’t clueing into this yet because AI PCs are relatively new, is the more AI capability you have on your client device, the less AI capability you will need in the cloud. And it’s not an either or, it’s going to be hybrid like you said, but that is the reality. And you also don’t have to have the energy to move it to the cloud and back to the cloud as well. And that’s something that takes a tremendous amount of energy as well. Alex, you are the modern work opening keynote here. Any words of wisdom or words you’d like to end this with for the audience? I’ll give you the final word here.

Alex Cho:
Well, maybe I can tell you what we are excited about. Customer wins. Customer wins because we absolutely believe that AI unlocks disruptive productivity, creativity, and also connection. That’s why our focus in all of the collaboration space is so important. And we are so excited because we believe it’s a decade of new innovation and growth for this segment. It is a 1999 moment, as I like to say, which means we’re going to be energized, we’re going to be creating, some people will be singing, not me, but definitely we are very energized by this and customer wins, which is good for the industry.

Patrick Moorhead:
I’m super excited as well. And by the way, I think your team has my address. I would love to check out whether it’s Omni or any of your solutions, I’d love to try them out. Alex, thank you so much for coming on the Six Five again and opening the modern work track here. You have delivered exactly on the theme of the show, which is delivering tangible value, AI value to enterprise. And we’ve just begun here and I’m super excited to see how this rolls out.

Alex Cho:
Thank you very much. Great to be here.

Patrick Moorhead:
Thank you for tuning in the modern work track opener here with the Six Five Summit 2024. Hang out and check out all of the tracks. Could they possibly be better than Alex’s? I don’t know, but you need to check it out and let us know. Take care.