A few months ago, I had the opportunity to witness a number of emerging technology breakthroughs from HP and its labs (and I bet they didn’t even show the uber secret stuff). What I saw was Star Wars-like in its advancement and eye-wateringly impressive. At a dinner following the demonstration, I asked Meg Whitman why, as the makers of the light sabers, hyperspace drives and cloaking devices (or “toys” if you prefer), HP seemed unable to use their innovations smarter and earlier than their competitors – who buy the same technology from HP and then use it to serve their own customers. In other words, why should a pure play services competitor overseas be able to outflank the maker of the technology?
If the split into two businesses allows HP to answer that question and be more nimble and imaginative in using their own capabilities, then it can’t help but be a good thing. From the outside looking in, it seems that HP never fully capitalized on the potential synergies from integrating EDS’ services business. The organizational structure, perhaps its revenue accounting approach, and the historical product culture/mindset may have contributed to this. HP’s own data centers were not run by the services business, rather they stayed in the internal IT organization. It appeared that there was a lack of coordination between the products and services businesses, leading to sub-optimal outcomes.
In order to leverage that tradition of innovation, the new HP must be faster to market, aggressively exploit its breakthrough technology and proactively use that technology to re-engineer and re-craft their managed service contracts well ahead of renewal time. If they can do that, the seeming cannibalization of their book of business will in fact be a fortification.
And consider this: the most common frustration voiced by enterprise managed services customers these days is lack of innovation. That demand for new thinking and creativity can potentially be the very thing that energizes HP’s services business portfolio. Meanwhile, the printer and PC folks can do what is best for them. Maybe the services guys will figure out how to use one or two of their sister company’s products too, although cross-selling products into the services side of the business has long been an HP challenge.
The jury is out, but what an opportunity if it can be harnessed.