HP, despite taking a beating in the marketplace in the past few months, has come out swinging and claims it can recover lost ground. And there’s cautious optimism amongst analysts and experts that it might do just that.
The vendor saw a significant drop in profit for the last quarter – 44 per cent, with the the consumer and business PC and printer divisions hardest hit.
New global CEO, Meg Whitman, was frank in her assessment of the result: “For years, we’ve been basically running our business in silos. Under that model, we’ve built some of the biggest franchises in technology, but it’s also made us too complex and too slow,” Whitman said.
In terms of channel mindset, the company is still reeling from the damage former CEO, Leo Apotheker, caused the company following the early termination of the HP tablet and uncertainty over the future of the HP Personal Systems Group (PSG) business.
The company is working hard to re-establish itself with its partners and customers, however. Whitman, speaking at HP’s recent global partner conference, claimed HP is proudly a hardware company first and foremost, and its primary route to market will be through the channel. That was good news for the HP faithful.
She outlined a three-part turnaround plan for the company: It will work at fixing its supply chain by making the process more efficient and cutting unnecessary models; It will address what Whitman terms “ongoing problems” with each business unit through investment in technology as well as streamlining processes and support services; Finally, it will aim to better capitalise on the recent dramatic shifts in the industry around Cloud computing, information management and security.
As part of that strategy, HP has announced a new tablet, focused on the enterprise market, to take a second crack at the massive growth mobility market. Tailored for security, productivity and business network compatibility, Whitman claimed this product will differentiate itself by being better at preventing data breaches than the dominant rival, the iPad.
Locally, these strategies will look like a “back to basics” approach, according to HP director of channel sales organisations, PSG, Margrith Appleby.
“We are very committed to the channel,” she said. “We’re going to leverage our strengths, which includes a winning portfolio of products, and the ability to offer not a standalone piece of hardware, but a total solution”
HP will continue to rely on its channel to provide the reach and customer face time, as well as act as trusted advisor.
Appleby claimed that despite the market uncertainty around the company, HP has not lost channel partners. What it needed to do now, though, was be a stronger presence to them.
“It’s about being more proactive,” Appleby said. “We’ve not been as aggressive in going out and engaging with our channel. We’ve got a vast number of channel partners out there, and they need the support of HP.”
Partners can look forward to some ‘exciting’ product announcements, Appleby added, as HP ramps up its investments in R&D. Further to that, HP’s PartnerONE program aims to simplify engagement with the vendor for its partners.
The concern is that HP’s plans essentially amount to table stakes, and it might not be enough in itself to turn things around.
Channel Dynamics director, Moheb Moses, said the problem HP now faces is an “inconsistent business and product strategy”, and recovering from that might take longer than HP’s board and shareholders either expect or have the patience for.
“What happens a lot with companies is, if the sales aren’t there in the first six months, they’ll change their strategy,” Moses said. “HP’s tablet will likely struggle when it’s first released.
“This is driven by the quarterly mindset in the US. If you can’t achieve something in six months, then Wall Street starts to look hard at you, so what you see a lot of vendors doing is ‘unnatural acts’ at the end of each quarter. That’s fine from a revenue point of view but if often goes completely against strategy.”
According to Moses, HP needs to do more than just than just the basics, because the basics won’t realise Whitman’s stated goals.
“The first question is whether this is a short-term strategy or a long-term one,” he said. “It takes a long time to gain trust and a short time to lose it. HP has made a strong statement, but the question is whether its actions can back it up.”
It’s the hardware, too
HP also faces some problems with its products themselves, according to IBRS analyst, Dr Kevin McIsaac.
“I have to say the quality that I’ve seen in the last couple of years, and the support services in Australia have not been what I would historically expect from HP,” he said.
“HP itself is big company and some of their products have just become too complicated. If you look at an HP blade, there are at least three sets of firmware in a blade environment. There’s a firmware for each blade, there’s firmware for the chassis and so on.
“If you look at organisations like Oracle, with Exadata, they already have an end-to-end machine that comes with a part number. When they send you out a software firmware patch, it’s in one quick bundle.
“That’s where the industry is going and that is where HP needs to get more quickly.”
McIsaac said HP has done a good job in starting the transition to engineer its technology together into a stack, and pointed to the announcements it has made around virtual systems and cloud systems as part of that development.
However, the difficulties HP is having with the hardware translates to additional pain points for the partner – highlighting how important it is for HP to accelerate its planned turnaround.
“Right now if this client has a failure, guess who is bearing the heat? Channel partners. They sold it, installed it and configured it and it’s not working and the customer is very upset, McIsaac said.
“The channel partner must be under enormous pressure at the moment from the IT shop to make this work and that costs money.”