Assessing the Impact of HP LayoffsBy Michael Vizard | Print
HP needs channel partners to help put some distance between it all the drama
Any time a company such as Hewlett-Packard announces that it intends to lay off 27,000 employees, or 7.7 percent of its workforce, it’s going to be cause some consternation. There is a natural tendency to assume the sky is falling, and while it’s not an ideal situation by any means to put that in some context there are still roughly going to be 322,600 people employed at HP. You can still accomplish quite a bit when you have enough people to fill six sizable stadiums at your disposal.
The question that is of most concern to HP business partners is where these cuts going to being made over the coming year. HP CEO Meg Whitman has implied they will be made across the company, but at the same time she pretty much said product development and growth markets such as China will largely be spared. In addition to cutting administrative overhead, it would be fair to say that a lot of these cuts are going to be in the area of marketing, sales and services. If that’s the case, HP will need to rely on it channel partners more than ever.
Right now HP is caught in a transition on multiple fronts. Tablets are eating into PC sales, customers were putting off on buying servers in anticipation of new platforms such as the Proliant Gen 8 server, and a significant portion of the hosting business is shifting towards shorter term cloud computing contracts for which there is a lot more competition.
In theory at least, HP should be able to address these issues in the months ahead starting with tablets running Windows 8, an increase in server sales that will be driven in large part by interest in new advanced systems management capabilities, and the general availability of HP cloud services. At the same time, HP remains strong in printer and is making headway in the networking, security and software categories, all of which suggests that despite all the turmoil the fundamentals remain relatively strong. In fact, the news of layoffs actually seemed to drive HP’s stock value higher this week.
What’s even more interesting from a channel perspective is that in the relatively near future selling IT products should get more profitable. As more services are automated, the cost of delivering those services drops. That creates opportunities for solution providers, at least for a while, to turn a higher level of profit even if gross revenues fall. That same thinking is also behind many of the decisions that the management team is trying to make right now.
As one of the most important vendors in the channel HP’s long term viability is critical for a significant part of the overall channel community. While no one wants to see 27,000 people lose their jobs, many of those people are going to wind up being contractors for HP, or in some cases become employees of HP channel partners. Some might even start their own solution provider companies.
Because all these changes are happening simultaneously it may seem like something catastrophic is occurring. Arguably these changes could have been better anticipated over the years, but the fact remains that they are now long overdue. As Whitman has noted on several occasions there really is no changing the past, so the real question becomes where does HP and its channel partners really need to focus on now to get where they want to be tomorrow. The answer to that question almost invariable begins and ends with coming up with products and technologies that a customer wants to buy.
The best thing HP can do right now to make that happen is put as much distance as possible between it and all the recent drama. HP in the months ahead will need its channel partners to get everyone’s attention put squarely back on the capabilities of its products, as opposed to the soap opera in Palo Alto, Calif., that mercifully looks like it might be finally coming to a close.