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Posted by Peter O'Neill on September 25, 2009
By Peter O'Neill, Vice President & Principal Analyst at Forrester Research
Did you see the announcement by HP this week? EDS is now so
well integrated into HP's Technology Systems Group that it is time to change its
name. So, the business formerly known as EDS now wants to be called "HP
Enterprise Services". There's even more. As HP TSG's offering has been
extended so far (they do systems integration and outsourcing now after all)
they will now call that entity HP Enterprise Business. The press release cited
executives as saying things like: "Our clients expect us to harness the
full power of HP’s portfolio to solve their business challenges" and
"we are combining the strong services brand equity that EDS has built over
the last 47 years with HP’s technology leadership".
My colleagues in the financial analyst community have
praised the acquisition of EDS (see Thursday's New York Times) and sure, as Roger
Waters once wrote: "it all makes perfect sense, expressed in dollars and cents,
pounds schillings and pence". HP TSG (sorry, HP EB) now pulls in 47% of
HP's revenues and makes the most money. So, yes, we do need to stop calling HP
a printer company living off its ink business.
But allow me to be a little dubious about HP's positioning
going forward, which I assume was also a reason for the EDS acquisition. One of
the reasons that enterprises deal with SIs and consultants is that they expect
them to address the business issue at hand and only select technology solutions
when needed -- and then with a certain agnosticism. The reason that IBM is so
successful is because IBM GS is successful at being the #1 reseller for most
vendors in the industry. (The other reason is that all product units at IBM
compete not only in the market but for IBM GS mindshare which makes them
continue to excel at what they do.) This
naming announcement hardly implies that neutrality will become a standard
operating procedure for HP ES, nor does the executive citation about "harnessing the full
power of HP’s portfolio".
HP insiders tell me that it was important to rename the
organisation because the "technology" moniker was becoming an
inhibitor in meetings with business executives and because it needed to make
clear which market was being targeted by HP EB aka HP TSG. Well, on the latter
point, the press release states that "This group is focused on business
and government organizations of all sizes", so that is hardly clarified
and the general industry segmentation of SMBs, Consumers, and Enterprises seems
to have been misunderstood.
And what about this use of the term "brand
equity". Now most executives, even marketing executives, in the technology
industry come from either a product or a sales background, or both (So do I,
but I've been out on the dark side for 8 years now and Forrester's renowned
marketing practice which covers many industries has helped me to improve). So
marketing terms like brand equity are not correctly understood everywhere in
TI. How can you leverage brand equity by killing the brand? It is not as if
there is product brand equity - EDS was a people business and people tend to
change ships on a regular basis. So the equity can only be having good,
established processes for defining, managing and delivering projects and I am
not too sure if that is credible in 2 or 3 years time.
So, if you ask me, I would say that this announcement has
been poorly planned and executed. Last but not least: the entity name is too
inward-looking. Sure, HP executives all run a business. But they are a supplier to the
market and the market wants to hear what they supply and to whom they want to
provide it. Imagine you work for HP and must now tell a prospective customer
you represent HP's Enterprise Business. You are almost saying: "I am going
to try to maximize my profit with you".
Do you disagree with me? Anything I have missed? Feel free
to let me know.
Always keeping you informed! Peter
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