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Dominic Webb

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Dominic Webb is the European Channels analyst for IDC. He previously ran Samsung UK's display business and prior to that worked in various management positions within HP's PC business.The views expressed here are personal observations and are not necessarily those of IDC.
By | Dominic Webb 11th May 2012 11:15

Is HP's printer-and-PC mashup good for channel?

IPG-PSG merger winners and losers

Euro channel insight An admission to start with. As some of you will know I have a soft spot for HP, this is based on being a former employee at the company. I joined when the LaserJet One was in full swing and the LaserJet Two was just starting to be sold.

It was a time of stellar growth across all product categories, and this was as true for HP as it was for its competitors.

As the years moved on, I watched Bill Hewlett and Dave Packard make a comeback to run the company. They then passed the reins to Lewis Platt, who acquired Apollo and parts of Texas Instruments. He moved out and Carly Fiorina moved in, as did Compaq. Mark Hurd replaced Carly (with Robert Wayman as acting chief in between), and the rest is history.

So what are my thoughts on the Personal Systems Group (PSG) and Imaging and Printing Group (IPG) merger? This type of announcement impacts the whole of HP and creates interest and comment globally. I’d like to look at the impact on a number of key elements, then look towards the short-, mid- and long-term possible outcomes.

People

HP has been under enormous pressure for a number of quarters, with another set of headlines arriving ahead of the head honchos' announcements every day. Each of these headlines hits home with the employees – remember that HP is much more than just a company for some of these individuals, it's a way of life. So when you keep seeing these announcements in the media before you are briefed by your management, it creates uncertainty.

Uncertainty in turn creates indecision, and this impacts the bottom line. If you are more concerned about your future role in an organisation that now has two of everything, you tend to divert your attentions away from day-to-day sales and strategy and more towards survival. This was very much the case when PSG made the August announcement and it’s just as true today. HP is a bit like a super tanker: it takes a long time to change direction, and often is made up by many tiny incremental changes. The competition understand this, so expect them to maximise the opportunity of uncertainty and indecision over the next few months.

Products

PSG = Products. If I was going to be unfavourable I would say products without any real solutions wrapped around them – and this is not just an HP issue: it’s hard to wrap solutions to products that are really little more than commodities. However IPG = Products + Services (Managed Print Services and Basic Print Services to name just two). IPG has transformed itself from a commodity product play to a solution play.

With the Compaq merger I witnessed the integration of some great products, but the loss of a truly impressive marketing machine. It’s a bit like putting a five-year-old and a 10-year-old in a room for a few hours, the five-year-old does not start behaving like a 10-year-old, rather the older child begins to act like the younger kid. Let’s hope that this merger really does combine the best parts of the two individual groups.

Partners

HP’s channel partners have had a tough time over the last decade or so. First we had the HP move into the direct fulfilment model, and then we had the Compaq and HP merger. Recently we had the spin, sell or keep PSG fiasco.

All through this the partners have stood loyal, continuing to promote and sell the products and their associated services. Now you could say that all this upheaval has created apathy from the community towards HP, but this is not the case. Consistently, and over a good many years, HP has created programmes, evolved approaches, and listened to its partner communities.

This has created “a best in class” offering, and it’s demonstrated by the loyalty of its partner base. Simply put, HP really understands the channel and how to work alongside it. Partners I have spoken to express a cautious welcome to a combined PPSG. The caution tends to stem from concerns regarding the lack of focus, and how this could create hesitation within HP. In the past HP’ers have tended to become inwardly focused, as they worry more about their own jobs than maintaining partner loyalty.

Costs

PPSG equals big savings. They currently have two of everything and this can be trimmed down to one in most cases. However the supply chains between the two groups are dramatically different and also the associated R & D approaches.

In PSG, Intel and Microsoft have a big part to play, but in IPG it's mostly down to HP. Still HP is just like any other company from a people viewpoint: staff are one of the most expensive things on the balance sheet, so reduction in headcount reduces costs. Combine this with Meg Whitman publically stating that profits will rise through superior management of HP’s internal assets and you could allow for a greater investment in R & D – maybe it's time to dust off the ‘HP Invent’ campaign again?

End users/customers

It seems that the real winners in this will be the enterprise and commercial customers. With a combination of the above merged into one, they will hopefully get one set of consistent value propositions delivered by a single face. For those HP watchers that have been about for a long time, this harks back to the 1980s and 1990s, before the Compaq HP merger: it was called the CPO.

This is a real positive for customers and for HP as a whole, which has always played extremely well in this space. However, it presents a real challenge for the sales teams. Either they “skill up quickly” to understand their full capabilities (services as well as products) or they move towards an account director type model which adds further complexity from a customer’s viewpoint.

In the mid-market and SMB world, not that much will change; most of these customers are addressed by partners. These partners really understand their customers and markets – so it’s in their interests to buffer the end user from any undue impact. Optimistically you might say it opens up slightly different customer opportunities, although I do not agree with this view, mainly because partners have normally explored all the viable paths to sell into already.

In the consumer space, a different dynamic presents itself, and that is one concerning speed and agility. Consumers want the latest and greatest at the most affordable price point. This requires super-fast times to market and rapid management decisions regarding products and pricing. Timescales can be measured in days and hours, not weeks and months. Will the combined mass of PSG and IPG be able to react with the required approach? Only time will tell.

What happens next?

So, let's look at a few possible outcomes. Well, in the short term there probably won't be a great deal of change externally. Internally we have already seen the absorption of IPG into PSG. In Europe, Eric Cador has been tasked with enacting some of the changes. With Cador’s enormous experience of running a PC business I suspect that the short term will be just that: short, with a very quick set of appointments and management structures put in place.

In the mid-term, I suspect we will see a renewed vigour by HP in the Corporate and Enterprise spaces. Considering the time frame is in quarters rather than months, this plays very well to our hopeful and slow climb out of economic gloom. HP will be looking to push an "end device message" from PPSG, just as these organisations start to look at spending again.

Long term we have two possible situations. The first is that HP continues to grow as a one-stop shop for all its customers, combining software, services and product approach into one consistent message. If you take a look on many of the finance pages, this seems to be the underlying theme regarding HP’s financial performance over the coming years.

The second situation is that PPSG is spun off at some point in the future as a separate entity. PSG as an offering did not stand that well by itself (no really strong brands to identify with). However, PPSG now has one of the world’s best known brand names. Anybody for a Jetnotebook, or a Smartjetphone? ®

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