HP restructuring won’t lower costs, says Gartner

23 Dec 2003

HP’s recent decision to merge its services and enterprise divisions into unified sales and technology groups may benefit enterprise customers but, ultimately, won’t drive costs out of its own business, according to an analysis by Gartner.

Last week, HP unveiled a major restructuring plan that creates two new groups from its HP Services and Enterprise Systems Group business units.

The new Customer Solutions Group will be responsible for enterprise sales through all channels across the full HP portfolio, while the new Technology Solutions Group brings together the development and marketing activities of the former HP Services and Enterprise Systems groups. Both new divisions will operate with full profit and loss responsibilities.

Although it won’t be directly affected by the restructure, HP’s Personal Systems Group adds to its commercial channel operations the responsibility for the enterprise channel and will report directly to the new Customer Solutions Group for all channel sales. No changes are understood to have occurred in the HP Imaging and Printing Group.

In a research note, Gartner’s take on the restructure is that it will likely address HP’s main challenge in targeting enterprise customers. “An inward focus combined with segmented sales forces hosted by Personal Systems Group and the Enterprise Systems Group had led to a lack of coherence in the communication and sale of HP’s enterprise portfolio. In particular, direct sales of volume hardware (especially PCs) and services have failed to live up to expectations following the HP/Compaq Computer merger,” Gartner said.

By separating sales and technology responsibilities, HP should assume a more customer-facing focus. But Gartner said that the responsibility for channels will need to reside with the new Customer Solutions Group as the current structure brings unnecessary additional reporting and operational burdens.

“These moves may increase rather than simplify internal management. Gartner expects the separate sales responsibility to generate a new reporting structure that will need to be reproduced in each country and region. This will not help HP reduce costs and could even increase executive head count.

“The scale and breadth of the Technology Solutions Group may necessitate the creation of an additional layer of management. By combining HP’s services and hardware into an aggregated business unit, HP may inadvertently send its customers the message that HP services’ primary focus is to sell hardware.

“To remedy this, Gartner believes that HP should create a separate strategy and organisation around managed services that is not tied to enterprise hardware sales,” the tech analyst recommended.

By John Kennedy