Winds of Change Blow HP's WayBy Michael Vizard | Posted 2006-09-19 Email Print
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Opinion: Despite HP's current boardroom troubles, the company has come a long way from the days of trying to compete with Dell in selling direct.With all the sound and fury surrounding Hewlett-Packard's misguided efforts to root out boardroom-level leaks, it's pretty easy to overlook the major strides HP has made in recent months. And while that success may seem obvious given the company's latest financials results, there are a number of subtler trends driving HP's turnaround that warrant some additional discussion.
In fact, there are five significant macro events at work that bode well for HP's continued success:
1. Although nobody at HP wants to admit to any previous mistakes, the company's surreptitious efforts to take more business direct in order to emulate the Dell model pretty much blew up in its face. At the time, HP call centers were calling on the same accounts as their channel partners, and customers were using the call centers to get lower prices that drove margin down for both HP and its partners. Since then, HP has curtailed that effort, which means solution providers are once again likely to push HP versus just letting customers choose.
2. The second part of this equation comes down to a simple issue that most system vendors get wrong a lot more often than they are willing to admit. For any number of reasons, HP more often than not couldn't deliver the systems that people wanted to buy. And if they were available, most people didn't want to take the time to figure out how to order them using HP's arcane processes. The end result of this is that a lot of solution providers simply ordered Dell because it was the path of least resistance. To HP's better-late-than-never credit, availability has markedly improved.
3. The third driving force behind the HP recovery is pricing. Although the company still sometimes has issues with competing with Dell on list price, in general it can match Dell on pricing across the board. A key element of this ability is that HP is better able to get back to solution providers with special pricing in a timely manner. And in situations where HP is still more expensive, the delta between HP and Dell is narrow enough that most customers don't focus as much on acquisition costs today because they are more concerned about the cost of owning and managing systems than they are of the initial price tags.
4. Perhaps the least appreciated trend helping HP has very little to do with the company itself but rather what is happening within IT organizations. As the economy improves, the number of employees within any company is increasing at a faster rate than the number of IT people in place to support them. This means that IT people are paying a lot more attention to the vendors that have the richest set of systems management tools that will make their lives easier. And in terms of systems management, HP has held a decided advantage over rivals for a number of years.
5. And finally, speaking of rivals, it never hurts when your major competitors go out of their way to make things easier for you. Dell's well-publicized battery recall and ongoing support problems have customers questioning the real value of the Dell model. Meanwhile, Lenovo is having difficulty living up to its potential as an Asian-based powerhouse, while Toshiba, Acer and Apple make steady but not massive gains.
Whether HP can keep it up remains to be seen, but for the near future it appears the winds of change are blowing HP's way despite all the apparent lapses of ethics in the boardroom. But as comforting as this may seem to HP, the one thing the company needs to remember is that it is where it is today due to one part effort and one part luck. And as we all know, luck is subject to change.
Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at firstname.lastname@example.org.