HP's Focus on the Enterprise is Good for Its MPS Business
On June 1, Hewlett-Packard once again demonstrated its ongoing commitment to the enterprise space. HP said it will invest $1 billion over a "multiyear period" to automate and update its commercial data centers. Like in the past deals, HP's Imaging and Printing Group (IPG) will see little—or none—of the $1 billion. Still, the move will support IPG's assault on the enterprise space, which is being lead by Bruce Dahlgren, senior vice president of worldwide sales and services for IPG. Since jumping ship from Lexmark and joining HP in 2006, Mr. Dahlgren has labored to build a direct sales force with members who understand HP's enterprise customer's business processes and specific IT infrastructures. The teams include account managers and technology experts knowledgeable in HP products, services, and the clients' workflows and vertical applications and how HP can support them.
Although the term "managed print services" wasn't in vogue when he joined HP, Mr. Dahlgren was really hired to build out HP's MPS program. When introducing him for the first time as an HP employee in 2006 to a crowd of analysts, of which I was a part, IPG executive vice president Vyomesh Joshi said HP's long-term goal was not only to improve its ability to sell hardware but it also sought to allow its customers to acquire machines on what he called a "cost per page" basis. Mr. Dahlgren then took the stage and outlined how IPG would sell services along with hardware and supplies. Both men indicated that the ultimate goal was to change the cost structure of printing and copying for HP's enterprise customers, and lower costs.
I realize now that what Messrs. Joshi and Dahlgren were doing back in 2006 was effectively unveiling HP's MPS initiative, although it's doubtful the term "MPS" was ever used. At that time, I was somewhat skeptical that HP would be successful bundling hardware and services. The firm had done okay attacking copier vendors with its LaserJet 4345mfp, but its VAR channel was nowhere ready to begin writing click-charge leases for services, hardware and supplies. These were contracts that only copier dealers wrote, I thought. Likewise, the direct team was lacking in what it would take to compete in the enterprise space, with veterans like Xerox or Ricoh.
Since 2006, of course, HP and Mr. Dahlgren have grown increasingly active in the space. Last September, HP formed its Managed Enterprise Solutions (MES) business unit, which is focused on marketing IPG's managed print services directly to enterprise clients, including its portfolio of printers and MFPs. The MES unit, which is lead by Mr. Dahlgren and a team of nine, leverages HP's established direct sale force, as well as some of the assets of the EDS acquisition—a nearly $14 billion investment HP made a couple years ago in the enterprise space. There are currently 600 EDS account managers selling IPG products and services worldwide, and the organization is responisble for about 20 percent of HP's global MPS business.
In addition to MES's direct business, IPG is working to support the reseller channels around the world in their bid to grab MPS dollars. In North America, IPG has partnered with four distributors—Synnex, Supplies Network, NER Data and United Stationers—to bring MPS to enterprises, midmarket customers, and SMB users via the reseller channel. The so-called Collaborative Infrastructure Partners (CLIP) allows the distributors to use a shared sales, infrastructure and profit model to support resellers that deliver MPS. At the end of April, the QuickPage program debuted in Asia, which provides the channel with a vehicle to write one simple MPS contract for SMBs. The program is supported by HP's InCommand portal, a cloud-based platform for HP customers, resellers and finance partners. InCommand seamlessly automates many of the processes required for an MPS contract, including terms of the sale and financing, along with order fulfillment and management processes.
HP's MPS effort is bearing fruit in multiple regions, regardless of any skepticism I may have had. According to article published May 10 by ComputerWorld Australia featuring Mr. Dahlgren, HP's worldwide MPS business is now worth about $5.5 billion a year and generates about 18.5 billion pages annually. A little later in May, during the earnings call for the second quarter of the current fiscal year, HP CEO Mark Hurd said in Q2 the firm's "Managed print services had multi-million dollar wins in every geography across diverse industries including financial services, telecommunications, and transportation." After HP launched the MES unit in September, Mr. Joshi told Internet.com that HP had about 2,000 MPS customers. The ComputerWorld Australia article, however, indicated that the number had swelled to 2,600 by May. If true, HP's MPS business saw a jump of 30 percent growth in less than three quarters.
With numbers like that, it's tough to remain skeptical about HP's ability to execute in this space. But, of course, only time will tell.
Posted by Charlie Brewer on 06/07/2010