To HP’s New CEO: Keep PCs And Focus On Consumerization Of IT To Best Serve The Enterprise Customer

Frank Gillett
Vice President, Principal Analyst
September 23, 2011

Picture the scene in the HP boardroom when the board members decide the company needs (another) new CEO. They had trouble just last fall finding outside candidates and don’t seem satisfied with internal candidates. I can imagine a New Yorker cartoon–like scene, where they all agree to draw straws, and the board member drawing the short straw gets the CEO job!

But it was not like that. The board realized something that Forrester felt for some time — that HP needs better communications to customers, markets, and employees. Meg Whitman, former eBay CEO, is a not an obvious choice, especially given her primarily consumer and web business experience. But she brings strong Silicon Valley roots, something lacking in HP’s recent CEOs, which should help a lot with injecting new energy into HP. And she starts with a strong business reputation for growing eBay, being a good leader, and communicating well. Plus she’s got a nine-month head start as board member on understanding HP over any outside candidate.

As the new HP CEO, Whitman faces a difficult situation. HP has a strong set of products and customer brand that are being damaged by the uncertain directions of the board and the repeated CEO turmoil. Meanwhile, the Wall Street traders and technology press are overreacting, as they often do — HP has solid product and service offerings that are just as good as they were last week, before the latest leadership turmoil. So what should she do?

Let’s start with the August announcements. She can’t undo the cancellation of its mobile device business (a strategic error in our view), and it would be a mistake to undo the Autonomy acquisition (good strategic buy, but they may have overpaid). She should reconsider the PC spinout, accelerating the decision on that — the synergies for customers and for the supply chain are strong. If HP needs cash to invest in the business, portions or all of the Imaging and Printing Group are the right candidates for sale, since they have less synergy with the rest of the business than does Personal Systems Group.

For business customers, HP has strong enterprise data center technologies and infrastructure management software, but the Enterprise Services group remains undifferentiated with too strong a focus on traditional low-margin infrastructure services. We have a positive impression of the new cloud infrastructure services that HP is developing and believe those will boost HP’s prospects. HP has a long-shot possibility of become a leader in enterprise cloud and services orchestration as an anchor of a larger ecosystem of products and services for customers. For this, however, they would have to make further acquisitions around elements like data analytics as well as services billing and provisioning. Meanwhile buying SAP would still be too much of a stretch as business applications and processes are way above HP’s capabilities and brand permission.

Although HP also has a strong consumer brand through its PC and printer business, its products clearly lack the same appeal as brands such as Apple. Whitman should revisit the question of HP’s focus on consumer markets. Forrester believes we’re at the beginning of new trend on the consumerization of IT, where consumer products skills will be increasingly important and relevant to selling to SMB and enterprise customers. Abandoning consumer markets and skills now is to give up a strategic advantage that HP now has over IBM and Dell for succeeding in the rapidly evolving work of business technology.


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