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Takeaways from the HP Breakup

by Nigel Walker, Partner

HP announced last week that it will split into two publicly traded companies by November 2015: Hewlett-Packard Enterprise and HP Inc.

According to the HP press release, Hewlett-Packard Enterprise will be “defining the next generation of technology infrastructure, software and services for the New Style of IT.” This company will be the HP Enterprise Services division, which acquired Electronic Data Systems in 2008, plus its server, storage and software business and, most importantly, its cloud infrastructure services. HP Inc. will be the printer and PC business, which the press release says will be the “leading personal systems and printing company delivering innovation that will empower people to create, interact and inspire like never before.” Each company is expected to generate revenues of around $57 billion globally.

Those of us who have lived through so many recent changes at HP are prone to react initially by saying “Here we go again!” However, this time it just may be different.

Here are the ISG Top 5 considerations for Hewlett-Packard’s enterprise business clients:

1. Take advantage of the new nimble. Hewlett-Packard Enterprise will have renewed flexibility that should enable it to improve its end-to-end enterprise infrastructure services. Because the capital requirements of the separating entities are quite different, the enterprise business will be able to respond in a new way to enterprise customers’ requirements and market dynamics without compromising the business of the other.

2. Count on strong leadership. Meg Whitman’s position as CEO of Hewlett-Packard Enterprise will enable her to focus on one set of clients and become more integrally involved in mega pursuits. As the executives in service provision retain their current roles, Hewlett-Packard Enterprise will be able to prioritize its goal of supplying superior service.

3. Look for cloud on the horizon. To date, HP has been going after business-to-business and business-to-consumer markets at the same time. A key move in this demerger is putting the cloud services and future machine developments into the enterprise business, which will allow it to gain organizational focus and integrate its service offerings in a consistent fashion and offer customers a full suite of services.

4. Beware of the hardware push. Because it also manufactures its own hardware, Hewlett-Packard Enterprise customer managers may push their equipment label rather than the best solution.

5. Prepare for another transformational deal. If the right business partner were to come along, Hewlett-Packard Enterprise will be able to improve its competitive position without creating the perception that it is competing with its formerly attached HP twin.

ISG helps clients chart the changing landscape of enterprise service providers. Contact Nigel Walker to discuss further. 

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