HP Can’t Wait to Facilitate

Sensing the winds of change, Hewlett-Packard is banking on its year-old Service Provider Program (SPP) to help it take advantage of industry trends to emerge by mid-decade as the leader in the new world of enterprise computing.

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“HP’s vision will take it head-to-head with global outsourcing giants IBM and EDS. But the SPP’s extending reach may make HP a giant among giants.”

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Launched in May 2001, HP’s program was seemingly just another all-emcompassing and somewhat-confusing attempt by a huge company ($45 billion in 2001 revenues) to be all things to all people. But there is more than just a land grab in the works, Steve Hanney, worldwide director of HP’s SPP, told ASPnews. The program is actually the first of many steps in the transformation of HP.

More Than an Outsourcer
No longer content to be just a hardware provider or outsourcer, HP’s program is ambitious attempt to redefine its role in the ever-changing world of computing. HP’s play is to become an end-to-end solutions facilitator (not provider), bringing together what it sees as the best-of-breed providers of everything from data center space to specialty independent software vendors (ISVs) in what it has dubbed an SP “ecosystem.” The result is then offered up to its enterprise customers in an a la carte fashion that encourages creative combinations of services, SP solutions, and hardware and software to solve problems.

“Our approach is to partner and leverage,” said Hanney. “If I can play the ecosystem well enough then I strengthen our outsourcing business because now they leverage the market leading niche players to actually do what they need to do. We actually leverage (partners) as opposed to competing head on. It becomes a much more a partner-focused approach as opposed to saying we can do everything.”

To ensure customer comfort, HP puts its name and, therefore, and clout behind all its SPP solutions. So it’s not surprising that HP’s revenue goal for 2002 is in excess of $100 million. In fact, so many service providers expressed interest in working with HP, the company has shut down recruiting for the time being while it sorts through all its potential partners. By November, 35 service providers will be in the program, up from 25 in early May.

For now the company is offering services only to enterprise players but the plan is to work down through the mid-market eventually ending up at the consumer desktop; similar to what America Online and AT&T have done but with more sophisticated offerings that Hanney would not discuss in detail.

HP is offering all of this without actually becoming a VAR for anyone. It merely recommends a solutions provider be it a data center provider as in the case of KPNQwest in Europe handling part of HP’s IT outsourcing contract with Nokia or selling White Pajama’s CRM solutions directly to end-users via its in-house, enterprise sales team. HP’s 50,000 strong partner channel can also get into the act it they want and sell SPP offerings as well.

What’s in It for HP?
The payoff for HP is increased sales of hardware and software to its service provider partners, which have agreed to build out on HP products, and, if the relationships they facilitate go well, to its end-use customers as well. The benefit to SP partners is obvious: access to HP’s customers.

Like other companies (for example, IBM, Sun, AT&T) that have tried a similar approach to combining partners and customers, HP helps its SP partners with sales and marketing. In fact, it is Hanney’s job to help partners meet predetermined quotas. In return, HP commits to sending as much business to the SP as the SP sends to HP.

This can take many forms from HP using data center services of one SP partner to cater to another’s customer needs and paying the bill itself (a la Nokia) to steering contracts to one SP or another.

To ensure all bases are covered, HP is also getting into mobile solutions offerings, content delivery services, Web services and unified messaging solutions. Some of this is being done through the SPP while some is not. Some of these services are new to HP and its customers, some are not. It doesn’t really matter though since the idea behind the ecosystem is to bring company-wide resources to bear when designing customer solutions. (On Monday, HP and Nokia announced a service quality assurance program designed to offer service providers a single view of voice and data infrastructure.)

“We have to begin to connect the dots to make sure we can effectively build the right solution for our customer,” said Hanney. “Our challenge as a supplier of hardware, software and services is how we can play the partners off one another? How we can connect them together? How we can build offerings that make sense for our end customer?”

Complex + Ambitious = Patience
Acknowledging the complexity and ambitious nature of the program, Hanney said the company does not expect significant returns for a couple of years at least. Last year, 2002 and into 2003 and possibly 2004 are being used to gain an understanding of where HP is eventually going to fit into a world potentially dominated by service providers and Web services. The idea is to move slowly, carefully picking partners, deals and customers so that the company stumbles as little as possible in its metamorphosis.

“We’re really gong to understand what it takes to build this go-to-market play with these companies,” he said.

Hanney believes the Compaq merger will have little effect on the program since the two companies are fairly well-aligned in their thinking about the future (i.e. it’s the solution that matters, not how you get there). “Certainly the merger is going to have an impact and will be a good opportunity for us to strengthen our position,” he said. “We see it as a good play for us.”

HP’s vision will take it head-to-head with global outsourcing giants IBM and EDS. Not that HP is a minor player in this game to begin with, but the SPP’s extending reach may make it a giant among giants.

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