Throwing a curve ball

ProCurve - HP's networking arm - is intensifying its activities in the Middle East and is ready to go head to head with Cisco, John McHugh, who heads up ProCurve's global operations, told ACN.

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By  Colin Edwards Published  March 12, 2006

|~|mchugh200.jpg|~|McHugh: ProCurve's market visibility needs a boost.|~|For a company that hasn't been on the enterprise networking radar screen for very long, ProCurve Networking by HP - to give it its full name - has done remarkably well. The last decade has seen it become number two in the managed Ethernet switch market - bigger than 3Com, Nortel and other leading vendors in the space.

That it has done so is remarkable because, as John McHugh, ProCurve's vice president and general manager admits, the company has not been as visible as the other players in the field. "The biggest issue we have is letting customers know we exist and getting them to understand how complete our offering is and finding the ones that are free to make a choice in their networking infrastructure."

About 18 months ago, the company started really promoting HP's networking business as ProCurve Networking. "We stopped wrapping ourselves in the HP flag and started saying that the industry wants us to be a networking company. Unfortunately being a company of our size inside of HP, you're not relevant, even though my enterprise hardware business is bigger than 3Com's, bigger than Extreme's - yet we're still not as well known," says McHugh.

Even so, it is certainly winning plenty of business. While the company does not talk revenue figures - or profitability - it does talk percentage market growth. According to McHugh, revenues have grown 300% over the last five years. The market grew 25%, while Cisco grew 50% in the same timeframe.

With a respectable market share, a confidence that it will continue to grow and a separate identity, ProCurve looks a prime candidate for becoming a part of HP's plans to hive off some of its operations into independent companies. If it is, McHugh isn't talking about it.

"The fact of the matter is that the way we are running the business, if HP made that decision - and it's not a decision I get to make or get to know about - it would not have a lot of impact on our ability to deliver solutions and value to the market or how we operate. We run as a very independent entity within HP and it would not be a huge issue to our ability to compete," he says.

McHugh is more comfortable talking ProCurve’s revenue growth than he is profitability. "The reason profitability is confusing is because, depending on how you allocate corporate structures, I could make up almost any number. I don't want to mislead or say something that is not accurate."

The challenge ahead is to continuing closing the Cisco gap - or rather, chasm. The latest IDC figures for Q3, 2005 show Cisco with 52% market share in the European switch market. ProCurve has 17%, 3Com 10% and Nortel 5%.

The strategy McHugh has adopted in the past to challenge Cisco is to look at the values Cisco provides to customers and implement what he believes are more efficient solutions providing additional features, functionalities and capabilities at a much lower price, but without becoming a commodity player.

While following a strategy of providing more for less, McHugh points out that the average selling price of its products has been going up over the last five years. Its newly launched 54000 switch, for example, is priced at just over US$100 a port with similar if not greater functionality than devices costing US$200 to US$300 a port.

"Is ours the cheapest port on the market? No. Is it a least expensive advanced technology port out there? Probably. Instead of customers feeling they cannot afford that type of capability today, we're giving them the opportunity to be able to afford it. That's the sort of subtlety of what we're doing. We're not into taking today's technology and making it as cheap as possible. Just now the strategy is working great."

On the product side, where Cisco has a vast collection of products covering every little spot on the product galaxy, ProCurve has picked a more limited and more focused set of products that can be deployed in multiple roles.

But a lot of users like the one-stop shop concept that Cisco provides whereby they have the IP network infrastructure onto which they can add different applications such as IP telephony or video. McHugh does not believe ProCurve is missing out on meeting customers' total needs by focusing on core and edge products.

"There are customers who are willing to embrace the complexity and pay the price of having single vendor solutions and being locked into a vendor without a lot of choice. What we find is that our customers tend to be a little more balanced in their consideration. They want to best of breed products; they want to buy products based on open standards; they want highly reliable products that interoperate with other vendors' products; and they want choice when it comes to choosing a voice solution."

ProCurve's global successes have not been mirrored in the Middle East, but it is something the company now intends to address. It sees the Middle East and Eastern Europe as key growth areas.

The company is now building up its sales resources in the region especially in Egypt, Jordan, UAE and Saudi Arabia. Recognising that its Technical Support Centre in Holland wasn't addressing the region's language and specific needs to have support nearer to the user, it has opened support centres in Dubai and Saudi Arabia.

One of the aims now, says ProCurve’s Alberto Soto Garcia, is to expand beyond its traditional small-company market base in the region and address enterprises. "The type of market we are now addressing is the enterprise market - big customers with sophisticated requirements in terms of support, local presence and ability to execute. They are different to the customer that only needs basically a couple of switches."

The company is now recruiting and developing high level certified and qualified resellers to support this as well as expand its channel and improve its go-to-market strategy for the smaller companies.

"What we are doing is shifting up a gear. We are working on developing the channel.We are fully aware that in this market you cannot go from zero to 100 in 10 seconds. There is a learning curve that we have to go through. There is a learning curve that our channel has to go through," says Garcia.||**||

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