HP Reveals Strategic Direction for Both New Businesses at IAS 2015

by Robert Palmer | 6/10/15

I am just returning from the HP Industry Analyst Summit 2015, held June 2-4 at the Venetian in Las Vegas. The event was an eye opener in many respects. To begin with, this marked the first year that HP has combined its analyst briefing with the HP Discover customer event. Having never attended HP Discover, I was able to see firsthand the lengths to which HP is willing to go to keep its customers enthused, involved, and informed.

HP Discover is a massive event, with more than 10,000 attendees comprised mostly of customers but also including press, analysts, and HP partners and staff. The entire venue was spread out over several floors within the Venetian conference center and the Sands Expo center. The product/solutions showcase, called the HP Discover Zone, was simply enormous. There were sections dedicated to the four areas that have become synonymous with HP’s “New Style of IT” theme: mobility, security, cloud, and big data. Meanwhile, there were huge display sections dedicated to products, software, technology, meeting rooms, theaters, and HP partner solutions.

Interestingly, the section dedicated to HP’s Enterprise Group was front and center at the entrance to Discover Zone, while the Printing and Personal Systems floor space was tucked far back in the corner. In fact, the opening day of the event was all about HP’s Enterprise business, which is not really all that surprising. As a customer event, HP Discover has always been focused on HP’s enterprise solutions and services.

The New HP Enterprise

Of course, the topic on everyone’s mind leading up to the event was the proposed HP split. Last October, the firm announced plans to divide into two separate but equally sized organizations, one to focus on the enterprise solutions and services business (HP Enterprise) and the other responsible for PCs and printers (HP Inc.) During the keynote session to kick off HP Discover, CEO Meg Whitman immediately addressed the issue by stating that the split would become effective at the end of its current fiscal year, which occurs in October. (For more on the proposed HP split, see story here).

Obviously, with two separate organizations comes two different brand identities. Earlier this year, HP introduced the logo for HP Enterprise, and Whitman wasted no time in displaying it formally to attendees at HP Discover. The new logo consists of a simple green box over the name: Hewlett Packard Enterprise. According to Whitman, the simplicity of the new logo is symbolic because it represents HP’s simpler structure and a renewed commitment to focus. Whitman added that the green color used for the “box” or “window” above the company name ties both to growth opportunity and sustainability.

Not surprisingly, HP Inc. will keep the old HP logo and brand identity, which is linked more closely to the firm’s printing and PC businesses. Clearly, there is significant legacy value tied to the old HP logo and it would not make sense to separate that brand value from HP’s hardware businesses. Indeed, we learned later that the “Inc.” would eventually be dropped from HP Inc. once the separation is official. In other words, the personal systems and printing business will simply be referred to as HP in the future, which was welcome news to those of us who felt the HP Inc. moniker was a bit cumbersome.

Once the branding discussion was out of the way, the rest of the keynote session was all about HP’s Enterprise business strategy. Whitman’s talking points focused on how HP Enterprise will help lead organizations in the transformation of IT infrastructure. “We are living in an idea economy,” she said, referring to the speed at which new ideas can become new products, solutions, or services. “Every Fortune 1000 company today is at risk of missing a new idea or in suffering from massive market disruption.” To help businesses deal with the new speed of business, Whitman said that HP Enterprise is launching four new transformation areas: hybrid infrastructure, protection of digital assets, empowering a data-driven organization, and workplace productivity.

Of course, the keynote was ripe with overarching themes with a deep dive on issues fostering change in the workplace environment, including the shift to mobility, cloud, and big data. What was missing, however, was any discussion at all about HP’s printing and PC business. While others from the HP Enterprise management team were invited to share the keynote stage, there was a noticeable absence of executives from HP Inc. In fact, HP’s printing business was largely overlooked during the opening session, apart from a cursory mention from Whitman regarding recent innovations in HP inkjet and 3D printing technologies.

Analyst Summit

On the second day of the event, analysts moved into separate breakout sessions for HP Inc. and HP Enterprise. The purpose of these sessions was to provide analysts with an update on strategy and technology innovation across various business segments. Although much of what was disclosed regarding technology innovation is under NDA, there was a good bit to learn from HP Inc.’s newly formed executive team, led by executive vice president Dion Weisler.

One of the first takeaways was that HP’s management team is clearly excited about the future of print. It was almost as if the cover had finally been lifted and HP was once again free to talk about printing and printing products. It is no secret that HP’s printing business has taken a back seat in recent years as the firm shifted its focus and resources to other, more growth-oriented sectors. But at IAS 2015 there was clear enthusiasm about growth opportunities in printing. In fact, much of the discussion was about new hardware and technology innovation designed to propel HP into new market segments. It was one of the few vendor events in recent memory where “hardware and services” actually outpaced “solutions” in terms of discussion topics.

HP’s says that its strategy in the printing business is twofold: win in its core businesses and invest for future growth. Sound familiar? It should — almost every other OEM in the industry has touted a similar strategy. Nevertheless, HP has provided significant detail underneath that strategy, with what appears to be a viable plan for growth. To shore up existing markets, HP hopes to outpace competitors by driving innovation and introducing compelling and differentiated products, while accelerating the shift to contractual services and subscription-based models.

Naturally, HP talked at length about progress in its MPS business. According to Weisler, in some markets and regions, more than 80 percent of print is purchased contractually. Mike Weir, Consulting Management for HP’s LaserJet Enterprise Solutions business, added that the market for MPS direct in the private sector is beginning to slow down — growing at a rate in the low single digits. Nevertheless, MPS in the public sector is growing faster than the enterprise, while SMB represents the fastest growing market for MPS. Weir said that HP plans to drive new routes to market for MPS based on four fundamental tenets: strategic partnerships, solutions, global delivery, and innovation.

Since the announcement, there has been much speculation as to how the proposed split would impact HP’s abilities and capabilities in the MPS space, which we discussed as part of our initial analysis. The intersection between IT infrastructure, managed services, document services, and enterprise solutions is an obvious overlap between HPE and HPI — both in terms of solution sets and customers served.

When you think about managed services, much of HP’s competitive strength is tied to its IT expertise and broad portfolio of enterprise services and solutions. Dion Weisler addressed this issue somewhat by explaining that, going forward, HP Enterprise will actually become a Platinum Partner for HPI in support of ongoing and future engagements for IT services. HPE will take the lead with some current enterprise customers while HP Inc. will serve as the lead for others, depending upon circumstances surrounding the engagement.

HP also identified other target areas for growth, including graphics and packaging, 3D printing, and A3 business pages. Of course, the A3 market has been in HP’s sights for quite some time but for various reasons the firm has yet to achieve significant penetration or market share. According to Weisler, HP currently enjoys 33 percent global share in the A4 market, but only 3 percent share in A3. This is obviously why HP continues to target the huge number of pages currently produced on A3-size machines.

HP also continues to tout advancements it has made with its inkjet technology. The firm believes that its PageWide print head technology is a clear differentiator that will be instrumental attacking growth opportunities. Already, HP’s PageWide technology has carved out significant new markets and pages for HP in areas such as production printing, wide format, and office inkjet. In fact, HP says that it has reached over 100 billion pages printed on the InkJet Web Press, which is now averaging 4 billion pages per month. That is not a number to be taken lightly. Broadly speaking, HP hopes to leverage its inkjet innovation to reinvigorate the home consumer market while accelerating growth in business printing segments.

Our Take

One comment from the audience that came during a Q&A panel is that HP Inc. seems almost like the old HP reborn, which is a comparison that really resonated with me. It has been a long time since we have heard HP executives talk so openly about technology innovation surrounding printing hardware, solutions, and services.

In many respects this was a welcome and refreshing change. With all the talk about print as a dying process and the relevance of print giving way to digital display, it is nice to hear a different viewpoint once in a while. HP clearly is investing and innovating in the business of print, and in fact it views printing as a significant growth opportunity — not just in niche areas of the market but also in a broader range of segments. Of course, printing is HPI’s bread and butter, so to some extent it has to continue to bolster the outside view of what is undoubtedly its core business.

The question is: can HP Inc. achieve the growth targets it has set in what is obviously a very mature printing market? It is not a simple question to answer, but the reality is that HP is already demonstrating fairly strong growth in many target segments: graphic arts, production and packaging, office inkjet, and MPS, for example.

As already stated, one area that remains a huge opportunity for HP is the office A3 market. A product and channel strategy that allowed it to gain significant share in A3 would deliver substantial results for HP Inc. Historically, the firm’s problems in this market have been tied to its limited A3 product line and the lack of any meaningful presence within the high-value imaging channel.

The number of attempts by HP to court the traditional office equipment channel date all the way back to the introduction of the Mopier, and include programs based on a various mix of branded and rebranded OEM machines, distribution agreements with Canon, and a failed attempt at A3 office inkjet with the original Edgeline product. If HP is to see future success in the A3 market it will have to execute much more effectively than it has in the past — both in terms of product and channel enablement.

In any event, it is hard to deny the level of confidence coming from HP’s leadership team when it comes to the future of print. Of course, much of this change in perception is due to HP’s separation. Previously, HP executives viewed the printing business primarily as a cash cow: manage decline and leverage profits to fund other areas within the broader HP.

Going forward, however, HP Inc. will need to drive growth as a standalone company, and like it or not printing is likely to be the best source for driving revenue and profits. It is hard to see how HP could squeeze much more from the highly competitive PC business. As Dion Weisler put it, “printing is the critical engine powering growth for HP Inc. in the future.” From what we saw from HP at IAS 2015 — both in terms of technology innovation and in terms of underlying strategy — the future for HP Inc. is definitely bright.

Robert Palmer is chief analyst and a managing partner for BPO Media, which publishes The Imaging Channel and Workflow magazines. He is an independent market analyst and industry consultant with more than 25 years experience in the printing industry covering technology and business sectors for prominent market research firms such as Lyra Research and InfoTrends. In December 2012 he formed Palmer Consulting as an independent consultancy focused on transformation, mobility, MPS, and the entire imaging market. Palmer is a popular speaker and presents regularly at industry conferences and trade events in the U.S., Europe, and Japan. He is also active in a variety of imaging industry forums and currently serves on the board of directors for the Managed Print Services Association (MPSA). Contact him at robert@bpomedia.com.