The Case for Breaking up HP. Part III

The Case for Breaking up HP. Part III

Twice, in September this year, we called for the orderly break up of HP. This was for the historic reasons of board delinquency, lack of strategy etc. HP is both a product company and a services company. With Meg Whitman’s appointment as the new CEO, we thought that she should at least be given the obligatory 100 days grace to illustrate the power of her leadership and vision. Sorry but from what we see, or more to the point, what we do not see, time is up.

Meg spoke publicly about “the number one question that people ask me, and the answer that I must give succinctly is (wait for it …) … what is HP? Is it a hardware, software or services company?”. Good question, so when can we expect the answer?

On Monday 12th December 2011, The Times devoted two full pages to an interview with Ms Whitman. The interview was given during her HP Discover conference in Vienna. What followed was to the dismay of every single employee of HPES, the enterprise services arm where the world’s number two (by revenues) outsourcer sits. Meg did not mention “services” once … not once. She did however discuss WebOS, TouchPads on Windows next year, Android, Chrome, tablets and pc’s, Apple, something she called “ink”, etc but services – not once. Poor Times questioning? Poor editing of the article? Or perhaps this is the root cause of HP’s continuing woes. ‘Services’ is never acknowledged or spoken about in depth, like some old fashioned illegitimate child.

HP has $27Bn worth of outsourcing contracts coming to an end in the next thirty months. Buyers of said services want certainty and crave continuity. Will the child be formally acknowledged?

The thundering silence is disquieting the very people who hold HPES’s fate in their hands. Not least of whom is Her Majesty’s Government, the stronghold and bedrock of stability and wealth that EDS established and HP inherited when acquiring EDS. How has HP’s UK government record fared since the acquisition? Not a single major win. This above all should alert Ms Whitman to the fact that the nearing 100 day review needs the clearest statement on the future of HPES.

The HP executive’s reputation for being bean-counters, imposing process for processes sake and their fixation for a known and predictable profit margin, all justifiable as a manufacturer, does not lend itself to the riskier and more profitable business of outsourcing and service provision. It may suit commodity cloud services provision but not huge transformational projects. HPES needs investment in next generation service provision (not cloud – for that way ruin lies). Face facts Ms Whitman, the board does not understand services and continued investment starvation will ultimately lose HP the game.

Unless you can “succinctly answer” your question Meg, keep your printer and ink company and for the sake of the investors and HPES’s staff, set your services arm free. The case for break up has never been clearer.

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One Response to The Case for Breaking up HP. Part III

  1. Sir Roger of Aldershot says:

    When HP first entered the services market, they suffered significantly from their sales model being very closely based on their hardware success.

    Their sales teams seemed to have migrated from the “tin shifting” side of HP and it took some time for them to become confident in submitting service offerings that recognised the different buying drivers and purchasing criteria.

    They suffered for a long time from “start at low cost and focus on the on sell” culture.

    This led to concerns about the impact of the technique on the longevity of the services offerings.

    Similar concerns existed with the then Compaq service offerings since they too had a similar pedigree.

    Fortunately for HP the acquisition of EDS enabled, eventually, a fairly full transition to a properly structured services offering – once the integration pains eased between two very differently managed, targeted and focussed organisations each – with their own distinct cultures.

    The development pains of HP/EDS were challenging enough without the intra HP tensions between services, PC and computing hardware and printers – each with their own life cycle, business drivers and margins.

    As we often say at this time of year, “it’s behind you” but, unfortunately for HP, “oh no it isn’t”.

    Those tensions have further played out this year with possible withdrawal from certain hardware based markets” “Oh yes we will, oh no we won’t”

    The indecision on the overall HP business strategy has left the services division starved of management focus, investment and incentives to grow.

    The time has come to find a suitable recipient for the division.

    However due to the overall financial climate on both sides of the Atlantic, methinks that the knight in armour may hail from a well known sub-continent where the business model of delivering services using mainly local resources is also under stress and the HP world wide based business could ease many of those challenges.

    Perhaps as the 100 days for Ms Whitman draws to a close and her decisiveness and leadership skills are revealed and intra HP strife banished “forever?”, we can get clarity on the overall HP strategy and see that the internal tensions are indeed “behind you”.

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