When two become one

By slamming its IPG and PSG divisions into a single unit, has HP unleashed a next generation go-to-market strategy for IT products? Or has it merely stopped critics banging on about the need to either dump its low margin PC business or spin off its lucrative printing unit? HP will be hoping that it is a combination of both.

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By  Stuart Wilson Published  January 19, 2005

By slamming its IPG and PSG divisions into a single unit, has HP unleashed a next generation go-to-market strategy for IT products? Or has it merely stopped critics banging on about the need to either dump its low margin PC business or spin off its lucrative printing unit? HP will be hoping that it is a combination of both.

In some ways it is. When PSG sat there as a standalone unit it looked primed and ready to be sold off, divested or outsourced along the lines of the recent IBM-Lenovo deal. Overshadowed by the highly profitable IPG business in every set of quarterly results, running PSG and taking on Dell has not been a walk in the park in recent years. By combining its Personal Systems Group (PSG) with its Imaging and Printing Group (IPG), HP has planted a massive ‘Not For Sale’ sign in the ground right next to its PC business.

Why? After all, the PC has become a commodity product that will be dominated by the largest manufacturers with the greatest economies of scale and the most efficient supply chain in years to come if you believe everything that you read. Is HP missing the point? Or does it actually have a few aces up its sleeves that others in the industry don’t know about?

HP has promised to continue breaking out PSG figures even when it is wrapped up inside the newly created Imaging and Personal Systems Group (IPSG). This significant announcement means that those who believed the move was designed to disguise profitability issues at PSG are sadly mistaken. HP is not hiding PSG within the new super unit; it is betting that the strength of IPG can help its PC division forge ahead.

HP boss Carly Fiorina explained the reasons behind the move to employees in an internal memo: “Vyomesh Joshi (VJ), currently executive vice president of IPG, will lead this new group and will continue to report to me. Under VJ's leadership, this new organization will drive profitable growth, leverage the power of the combined portfolio, and strengthen and unify our capabilities to beat our competition.”

“Now, we are taking the next step to allow us to deliver more powerfully on our execution priorities of accelerating profitable growth, achieving benchmark cost structures, improving performance discipline and accelerating our go-to-market initiatives,” stated Fiorina.

To truly release ‘the power of the combined portfolio’, HP’s formation of IPSG suggests that it wants its internal teams working together at a much earlier stage to identify these opportunities and release their true potential. When PSG and IPG were separate entities the products were being pulled together in bundled solutions but now HP will look to take that process to the next level and figure out the best way to bundle products and create solutions at a much earlier point in the development process.

For some time now, HP has had a solution partner organisation (SPO) charged with dealing with channel relationships across all business units and ensuring that PartnerONE — HP’s overriding channel programme — is implemented in a consistent fashion. In many ways, the role of the SPO unit is to ensure that partners see a united channel front from HP despite the fact that they are representing a selection of different business units within the wider group. With the SPO team’s role remaining intact, day-to-day channel relations should continue in their current form.

The real changes will probably occur internally at HP. Despite the fact that HP will continue to report separate financials for PSG and IPG, slamming these two units together will inevitably create duplicated functions, the need for management reshuffles and even the occasional power struggle. After all, who heads up IPSG? Is it the boss of PSG or the boss of IPG in each region that takes the helm?

This move can be looked at in two distinct ways: as a defensive move to preserve the diversity of the HP portfolio or as an aggressive move to position HP at the centre of the digital home and as a provider of end-to-end SMB IT offerings. Personally, I believe it is a bit of both. Take a look at IPSG’s product portfolio: printers, supplies, projectors, digital cameras, desktops, notebooks, handhelds, personal storage appliances and workstations for starters. The potential is there for comprehensive solutions and compelling offerings to be created for individual consumers and businesses alike.

At both distributor and reseller level, the volume channel may find itself dealing with a more streamlined HP in the future. Rather than two business units with different business agendas, IPSG will be pulling in one direction and will offer partners the offers and incentives that match its ambition.

Forming IPSG is a brave move for HP and one that would not have been entered into lightly. It is a fundamental change that reflects the growing convergence between IT products in different sectors. This deal will also have implications for distributors and resellers previously working with either PSG or IPG but not both. It remains to be seen whether those selling the products of one unit will now automatically have access to the other.

Senior HP channel managers have repeatedly said that they want partners totally committed to selling HP. That means making HP the primary vendor partner, selling more of the product portfolio and building an ever-deeper relationship with the vendor.

HP is betting that a one-stop-shop product powerhouse will have the edge in the IT world of the future and IPSG is the chosen vehicle for taking this vision to market.

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