Thursday, September 8, 2011

HP’s New Strategy:What HP’s New Strategy Means for Customers

he specifics of Hewlett-Packard’s constructued shift away for hardware stay unclear, and opinions about the company’s more enduring focus on enterprise application and services have run the gamut based on data from “corporate suicide” to “it’s about time.”

What does this iteration of HP’s strategic future tell CIOs close to its IT services business, and more importantly, what does it indicate for HP’s outsourcing customers?

HP is without a doubt attempting to model itself in the wake of outsourcing powerhouse IBM, says Adam Strichman, founder of outsourcing consultancy Sanda Partners. He notes that Big Blue continues to heap the hardware it no longer owns into its outsourcing deals.

“IBM heavily markets its services offerings around having ‘IBM centric’ hardware platforms (including Lenovo Thinkpads), retaining all the marketing benefits of hardware without so much owning it,” says Strichman.

At the same time, if HP technically rids itself of its computer business, it could end up with families who may be wary of an outsourcer this pushes its own hardware the impression that it is now vendor-agnositc, adds Strichman.

“This is HP’s ‘necessary correction’ in the industry, buying out of markets where it’s getting a hiding and focusing on the enterprise clients who want alternatives to IBM,” says Phil Fersht, founder of outsourcing analyst firm HfS Research.

Increased investment in softwaresuch as HP’s just now announced plans to purchase Autonomy for $10.2 billionmay or may not benefit HP’s outsourcing clients. “It really depends on the type of software upon which they focus,” says David Rutchik, partner provided outsourcing consultancy Pace Harmon. “If they continue to build their enterprise capabilities in IT service management and related areas, then such a focus should be very positive for enterprise IT outsourcing customers. If they start competing more and more directly in areas this kind of as CRM and ERP, they may damage their strategic relationships with the SAPs of the world.”

HP’s CEO Leo Apotheker has said that the company is taking “bold, transformative steps…to drive creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix.”

But real transformation in the outsourcing industry requires additionally than crap shifting money from hardware to software. “Saying who HP is going to focus on software and services does not necessarily mean that the coming years of those areas becomes especially enhanced,” says Strichman. “It is a way to point the conversation away on the reality that the hardware business is going to move faster toward an undifferentiated commodity. It is all on marketing spin.”

Apotheker, who recently removed HP veteran Ann Livermore from her role as work of enterprise services and replaced her with John Visentin, in the past of IBM, “has a massive task ahead to restructure the business,” says Fersht. “They’ll need to take a close give the impression at beefing up the consulting, aide integration and offshore operations next.”

While Big Blue is clearly the target, HP faces formidable competition on offshore rivals with lessen cost structures. “It’s one event to go following IBM, but another to fend off the aggression of the rampant Indian IT services firms, such as Cognizant, Infosys, HCL, TCS, Wipro and the newly-merged iGate/Patni,” suggests Fersht.

HP owns a majority stake in Indian IT services provider MphasiS and might consider rolling it fully into its outsourcing business, argues Rutchik.

“A top notch acquisition or two to bolster its enterprise services presence, a well-executed management and boom reorganization, a cohesive and obvious marketing plan, and we may yet just see this organization start to fulfill some of its potential,” says Fersht.

HP’s outsourcing customers, however, shouldn’t wait virtually to see if HP delivers. “They should insist on getting a multitude of visibility into future plans and a commitment which HP will execute upon them,” says Rutchik. He points out the earlier this year Apotheker indicated total commitment to its hardware business, and the organization invested heavily in a tablet it has since scrapped.

“All of these kinds of are signs so the company is grasping to determine its future identity and ultimate focus,” adds Rutchik. “IT outsourcing customers, who are typically in multi-year agreements with a great deal of dependency on their provider for continuing success, difficulty much greater comfort that this is not just another do our utmost to get HP’s growth and share costs on an upward trajectory.”

Fersht agrees. “The time has turn up for terrific outsourcing customers to get closer to the strategies and plans of their providers,” he says. “[For] an skyrocketing majority of clients today, needs are attaining more complex, and providers are being surveyed to take on more challenging tasks. Clients need to understand how is under the provider’s hood and need to bring in positive they have the contractual terms that enable them to renegotiate their agreements in dim of acquisitions that could directly impact their existing relationships.”
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