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HP: A Study in Risk

Now let's turn our attention back to HP. The challenge for any company is how well they align their service business to the core portfolio of the company. Clearly, HP must cover a much wider spectrum than EMC would. You would expect professional service offerings from HP to be more diverse. However, HP can't afford to be all things to all people. Yes, HP wants (and needs) to be a solution provider. And yes, HP appears to have a clear desire to replicate the IBM model of being a large-scale solution provider, not just a product provider. However, HP currently receives less than 16% of its revenues from services, versus IBM's almost 40%. When you compare HP-Compaq to IBM, you're really comparing apples and oranges. For HP to be successful with services in the short term, they need to choose solution focus areas that complement the overall HP product portfolio. (After all, the product portfolio is currently paying the bills and keeping the lights on.) Then HP needs to deliver those aligned services and solutions in a profitable manner.

Let's take a quick look at HP's current service positioning. The home page for HP Products and Services lists three broad service categories, as shown in Figure 4.

Figure 4 - HP service categories.

The Business Services link presents a menu of generic options, as shown in Figure 5.

Figure 5 - HP business services.

Surfing the HP site, I found a plethora of pages describing all types of service offerings. The ongoing concern regarding all these service offerings is twofold:

  • How aligned are all these service offerings to the core HP portfolio?

  • What's the business objective of all these various services? Grow top-line revenue? Pull product? If the answers are unclear, internal conflict surely exists and long-term success for many of these services is questionable.

Market analysts believe that HP is placing a heavy bet on services to stop the downward trend in company profits. However, an unaligned service portfolio only increases the risk of poor financial performance. To reduce the risk that currently appears to exist, HP needs to create a service organization that's tightly aligned to overall company objectives. The pending purchase of Compaq just increases the urgency of this requirement.

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