The strategy aims to put HP in a leadership position, offering what could prove to be a prevalent delivery model for everything from the most sophisticated of technical products to the most mundane of support services - namely, an end-to-end business application framework.
The nascent ASP (application service provider) model has gained attention, if not widespread adoption, as one step towards allowing organisations to realise the benefits of up-to-the-minute enterprise and e-commerce technologies without the overhead of massive internal IT works.
But with hundreds of ASPs to choose from, some corporate customers now have multiple ASPs all separately hosting their applications with no way to integrate them. But with vendors such as HP and IBM and professional services and consulting companies such as PwC and KPMG all looking to host and integrate multiple applications, the dynamics of the ASP world could be very different during the next few years.
"People are starting to realise that one application from one vendor is not the best way to go," said Dwight Davis, vice president and service director at Summit Strategies. "So the trend is integrating the applications, much as it has been [done] internally at companies, where EAI [enterprise application integration] became a lucrative area for products and services."
Meanwhile, an array of small, well-capitalised companies has emerged as managed service providers capable of delivering similar types of services.
Some observers see two distinct trends emerging among users looking for ASPs: some want ASPs that can offer soup to nuts packages, and others want different services from across the expanding universe of ASPs.
Companies such as Jamcracker, USInternetworking, and Corio, for example, offer ERP (enterprise resource planning), CRM (customer relationship management), and e-business applications and are promising to offer services integrated with one another.
Since the dawning of the e-commerce age, HP has tried to position itself as a full solutions provider to the Fortune 500 class of companies. But it has lacked a deep services organisation to accompany its otherwise solid line-up of server hardware and software products.
Although the company has tried to grow that organisation internally, along the lines of an IBM, and to expand it through acquisitions - witness the failed attempt to buy Ernst & Young earlier this year - it has only fallen further behind IBM's now $US35 billion Global Services organisation.
E-commerce services are key to HP's efforts to remain one of the top three computer companies in the world.
"The trouble in HP's life right now is that time is running out for it if it hopes to be a total solutions provider," said Anna Danilenko, an analyst at IDC.
Although HP has a solid infrastructure to offer corporate customers looking to implement mission-critical e-business, the business aspect of that tale is suspect, according to observers. With e-commerce driving corporate IT departments and business groups inextricably together, HP needs a better business story to tell, they note.
HP has already outlined a number of its E-services offerings, including plans for managed network and desktop management services, and created an E-Speak application integration architecture. A merger would allow HP to disseminate its E-services suite via the system integration skills of PwC.
"In the near future, a company that wants to be successful in e-business had better be telling a business-oriented infrastructure story and also have the expertise to make it happen," said Peter Burris, an analyst at Meta Group. "With PwC [HP] can more likely do that."
Through the proposed acquisition, HP would gain access to about 10,000 consultants in more than 30 countries.
PwC is a privately-held company and is not required to disclose its consulting revenues; however, several analysts recently put that number in the $US4 billion to $5 billion range.
But perhaps the biggest advantage PwC offers HP is direct access to CEOs and CIOs with whom PwC has long-standing and trusted relationships. Some observers think HP can leverage those relationships to win not only some generous service contracts but also some new business for its other products.
"What sets PwC apart is its strategic relationships with senior executives. [PwC] is already influencing IT and business strategies. What is important is that HP knows it can't mess this one up," said Allie Young, an analyst at Gartner.
If the proposed merger is completed, the successful integration of the two companies' services strategies and their corporate cultures could prove difficult.
Many of PwC's experts ponder higher-level concerns such as the issues of implementing mission-critical applications; it is less likely to focus on the nuts-and-bolts aspects of running a data centre, something many of HP's customers need.
"PwC's experts are some of the best and brightest. [They are] not guys who would be happy wandering into a data centre to see if a tape backup runs well. With PwC we are talking about guys who drink cognac and not coffee," Meta Group's Burris said.
What might help ease the transition is PwC's recent merger with Coopers & Lybrand and the lessons learnt about melding two large global entities.
In both companies' favour is the relative lack of overlap in their respective strategies, which means they can hit the ground running sooner. But the human aspect of things could prove trickier, according to some.
"Largely, the companies are complementary, but it isn't going to be plug and play. The people nature of this [services] business, with its strong cultural affinities, will be difficult to smooth over," Gartner's Young said.
HP community eyes change
Although a deal hadn't materialised by deadline, chatter about the potential blockbuster acquisition of PwC by Hewlett-Packard sent a spark through the show floor of the HP World 2000 Conference, in Philadelphia.
HP executives at the customer and channel partner event declined to comment on a possible purchase.
But some attendees welcomed the prospect of a merger, citing flaws in HP's services record.
"There's no denying its products are top notch," said Scott Zimmerman, software engineer at Delta Solutions Group. "But as far as getting things repaired, we haven't had [HP services] people return our calls before."
A single point of contact for e-business development and technological issues would be an advantage, said Dave Largent, information services manager at Townsend Tree, a field management company.
Some HP partners at HP World regarded the possible deal as a natural evolution.
"People who have general business problems have specific computing problems as well," said David Block, executive vice president and COO of Nobix in California. "From the professional services side, I think this really legitimises its effort and moves it into more of a total solutions vendor."
Yet for some, the transition might not be that simple. Coexisting with a slew of new services employees may bring about some initial "head butting", said Richard Israel, a customer engineer at HP service and support.
"I've been with HP for 21 years . . . Things are changing," Israel said during the event. "From a customer standpoint, you now have a whole group of people coming in that don't know the HP way' of doing things. [And] it's going to be tough for us to have some new kids on the block tell us what to do."
For professional services company EDS, another partner at the event, such a deal would not automatically strain EDS's ties with HP, according to Doug Frederick, president of information solutions.
Frederick pointed to EDS's legacy service relationship with IBM, in place despite clashes with IBM Global Services on many competitive deals.