IT Outsourcing: What HP's Latest Strategy Change Means for Customers
Will HP deliver on its promise of bold transformation and innovation in IT services? Its outsourcing customers shouldn't wait to find out, IT analysts say.
CIO — The specifics of Hewlett-Packard's planned shift away from hardware remain unclear, and opinions about the company's stronger focus on enterprise software and services have run the gamut from "corporate suicide" to "it's about time."
What does this iteration of HP's strategic future tell CIOs about its IT services business, and more importantly, what does it mean for HP's outsourcing customers?
HP is clearly attempting to model itself after outsourcing powerhouse IBM, says Adam Strichman, founder of outsourcing consultancy Sanda Partners. He notes that Big Blue continues to bundle the hardware it no longer owns into its outsourcing deals.
"IBM heavily markets its services offerings around having 'IBM centric' hardware platforms (including Lenovo Thinkpads), retaining all the marketing benefits of hardware without actually having it," says Strichman.
At the same time, if HP technically rids itself of its computer business, it could give customers who may be wary of an outsourcer that pushes its own hardware the impression that it is now vendor-agnositc, adds Strichman.
"This is HP's 'necessary correction' in the industry, getting out of markets where it's getting a hiding and focusing on the enterprise clients who want alternatives to IBM," says Phil Fersht, founder of outsourcing analyst firm HfS Research.
Increased investment in software—such as HP's recently announced plans to purchase Autonomy for $10.2 billion—may or may not benefit HP's outsourcing clients. "It really depends on the type of software upon which they focus," says David Rutchik, partner with outsourcing consultancy Pace Harmon. "If they continue to build their enterprise capabilities in IT service management and related areas, then their focus should be very positive for enterprise IT outsourcing customers. If they start competing more directly in areas such as CRM and ERP, they may damage their strategic relationships with the SAPs of the world."
HP's CEO Leo Apotheker has said that the company is taking "bold, transformative steps...to drive creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix."
But real transformation in the outsourcing industry requires more than simply shifting dollars from hardware to software. "Saying that HP is going to focus on software and services does not necessarily mean that the future of those areas becomes especially enhanced," says Strichman. "It is a way to point the conversation away from the reality that the hardware business is going to move faster toward an undifferentiated commodity. It is all about marketing spin."
