is taking a holistic
approach to its corporate sales of products and services by merging its
Enterprise Systems Group and Software and Services Group.
The consolidation of the two groups will unify HP's message to customers
seeking HP hardware, software, or services, said Ann Livermore, head of the
new "Enterprise Computing Solutions Organization." The Enterprise group
currently is responsible for server development and sales while services
picks up how to deploy these systems.
By combining the two, HP can pitch unified, and
potentially more lucrative, solutions to customers where competitors are
typically viewed either as service companies or hardware companies,
according to Livermore.
"It makes some sense," said Roger Kay, an analyst with
International Data Corporation. "They want to
be able to provide a seamless experience to their major customers."
And selling services is increasingly important for HP and other companies
whose customers include large corporations. For HP competitor
IBM, services is the fastest-growing
part of the company, Kay said. And Compaq was willing to spend billions of
dollars buying Digital so the company
could tap into the services market.
Services have the potential to generate a constant stream of revenue that
can last for years, Kay said. A company can make money as it helps a
corporation plan, specify, install, configure, test, maintain,
troubleshoot, and eventually even retire computer systems. "The whole thing
implies an ongoing relationship with continuous revenues," Kay said.
On the down side, services remains a low-margin business, Kay said, because
it requires a large staff. "It's a people business," he said.
services are not a business hardware vendors can ignore. Margins are
decreasing in hardware sales, so "it's important to have these ancillary
sources of revenue that are potentially profitable," Kay said.
"They're following the IBM-driven industry model," said John Oltsik, an
analyst with Forrester Research.
"There's too much money to be made right now doing services. I interpret
this as a first step toward really putting the strategy together for
But while Oltsik believes it makes sense for HP to have all its services
employees reporting to a single place, he thinks software should be split
out into a different organization.
"Software and services are driven in different directions," Oltsik said.
"HP buries its software division within services. It just doesn't make
Eventually, HP will likely break the software group back out on its
own, he added.
No employees will lose their jobs as part of the consolidation, because the
sections involved are "performing quite well for us," Livermore said.
The details of the HP's new organizational structure will be released
within the next week or two, Livermore said.