by September 5, 2011 0 comments











Andy
Mulholland, CTO, Capgemini

It’s
been an amazing couple of weeks kicked off by Acer delivering poor
results, followed by Dell lowering its forecast for sales in 2012,
then a

boost with good revenue figures from Lenovo, but with a reported 46%
coming from emerging markets, finally the real kicker of news from
HP. After talking up their competitive positioning and innovation
around webOS, developed from their purchase of Palm and its operating
system, suddenly six months later with the first HP tablets just
bought by proud owners, HP suddenly states it will all be scrapped.
And just to add to the surprise, HP also announced its plans to ‘hive
off’ its PC division, apparently with a preference for someone to buy
it.

As
HP is generally shown as the number one player in the PC market it
can’t be lack of volume or any of the reasons normally given, so what
is going on in the industry? And why does this feel like turning the
clock back to the moment when IBM made a similar decision
,
also apparently at a time of strength? Well certainly the PC market
has weakened due to the general economic situation and the alleged
splitting of the market dollars between tablets, smartphones and
gaming boxes, but to what extent are these things really linked?
Because the answer to this might be the answer to what this means to
the CIO with upgrade cycles and preferred supplier focus with one of
the major players.

Some
time ago
I
wrote a blog about being able to tell whether a person was a back
office employee using a desktop machine to process the work sent to
them, or a front office person engaged with the market, customers,
etc. in which case their tools would more likely be smartphones or
tablets deployed in mobility environments. In the current ‘do more
for less’ environment the pressure is on traditional IT to provide
the ‘less’ as its basic function is to automate and cut operating
costs, and the challenge in ‘do more’ is around new business uses and
requirements around new technologies. Put another way, PCs are
distinctly on the side of cost cutting where if anything the demands
on a PC specification-wise are at least stable if not falling, so the
replacement cycle can be deferred. Even when replacements are due the
enterprise buyer will use the volume to extract a bargain price, and
the impact of the Google Chrome PC offering has provided a new
leverage point for ownership.

Contrast
th
is
with the prices that Apple gets for its PCs, and it’s not just the
higher prices, it’s the higher margins that go with them, plus the
brand loyalty that sees the purchase of the iPhone and iPad too, as
part of the whole Apple experience. There is no obvious enterprise
cost value agreement that could support this but for the user
spending their own money, the ownership and usability experience is
worth the extra money. And here is the real issue for HP that was in
the ‘small print’ of their announcement, it was the choice between
being a player in the consumer market as well as in the enterprise
market, a current situation that actually splits their volume market
leverage in two and increases their costs by two different sets of
channels, support services, etc. Increasingly, those parts of
‘personal computing’ that make money are in the hands of the user to
decide what to buy and with the well established Apple and the deep
pockets of the new entrant Google, that’s quite a challenge, and
that’s before we mention what Microsoft might bring to this market
with its even wider range of devices and supporters.

The
alternative option is to focus on enterprise buyers
,
in which case it’s a very different game and reading the HP
announcement carefully this seems to be at the heart of their moves,
which is to compete with IBM in the mainstream enterprise market, a
market which they know well and have a more stable customer base on
which to build. The difference is of course that IBM made the choices
and re-designed their business model back in better times so HP has
some catching up to do on the business mix.

Having
started by commenting on what buyers are not buying then it
‘s
equally clear what they are buying as IBM’s results show with their
software business powering ahead. But the mix of software that makes
up the famous IBM Middleware portfolio has substantially changed over
the last two years with integration and management of real-time
information, mobility devices, etc. all making up a large part of
what is on offer and in demand by enterprises.

HP
has a good software portfolio too, and with its focus on ‘converged
infrastructure’ a lot of its products are in the sweet spot of
demand, but the software operations have always seemed to take the
back seat to the hardware business. With a new CEO from a software
background at SAP
,
the opportunities and possibilities may be clearer, together with a
business model, approach to the market, and management objectives.
Viewing the announcement in detail, and understanding its refocusing
on the enterprise together with offering the software that HP
customers will need to support their enterprises, new business
demands should provide some answers and comfort for CIOs with an HP
investment to consider.

However,
the
big unanswered question for now is what happens to the PC
business.


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