HP divisions unite on SMB strategy

Despite a stronghold on the midmarket, Hewlett-Packard is solidifying its SMB strategy in an attempt to garner a bigger portion of the pie.

 Hewlett-Packard Co.'s (HP) foray into the small to medium-sized business (SMB) market is hardly a secret. The Palo Alto, Calif.-based company is already a dominant player in that space, with its Proliant servers and its line of printers. But the SMB market is practically sizzling in terms of vendor opportunity, and like all other major server vendors, HP is setting an aggressive strategy to get a bigger piece of that SMB pie.

The design principle is affordability.
Urs Renggli
director TSG small and midmarketHewlett-Packard Co.
It's basically getting its act together in terms of putting out a unified message, said Mary Johnston Turner, an analyst at Ovum Summit in Winchester, Mass. HP has always had products for the midmarket, but now it has to pull that all together and solidify a strategy it can bring to customers. "They're getting the word out."

HP faces stiff competition from the likes of EMC Corp., IBM and even Dell Inc., all of which have been coveting this market for some time. But with IDC predicting the market will reach $5.7 billion by 2010, the market is ripe for the taking.

The company is well-positioned to do it, Turner said. For one, HP earnings are strong -- it has outpaced rival Dell in personal computer sales in the first quarter, marking the second straight quarter it grabbed market share from its struggling rival. And despite a decline in overall profit margin, which slipped to 7.3%, down from 7.7% in the previous quarter, analysts say HP's mix of products should help it maintain its market growth -- at least long enough to gain solid ground.

Today, about a third of HP's revenue comes from SMBs -- about $30 billion. Executives expect to see continued "healthy growth" in that area and suggest that at some point, its SMB business could equal that of its enterprise business. "You might see a slight shift," said Urs Renggli, director TSG small and midmarket at HP, during a press briefing Tuesday. "But it won't be dramatic."

Renggli said HP has a "good understanding of what the [SMB] market is looking for," and its product strategy is reflecting that. Instead of offering a dumbed-down version of an enterprise product, HP is building products for SMBs from the ground up.

SMBs are very different from enterprises, Renggli said, and when HP approaches midmarket companies it does so with three basic philosophies: They have limited IT resources, they need it simple and they want solid, reliable products.

"The design principle is affordability," he said.

In the past several months, HP has pushed out an array of products designed specifically for the small to midsized markets. Last week it announced HP StorageWorks D2D Backup System, a disk-based backup and recovery system that simplifies data protection and disaster recovery. The new storage system has been designed for business continuity, a top concern for SMBs.

In a recent study by Framingham, Mass.-based IDC of IT decision makers at small and midsized firms, more than 50% cited data protection, disaster recovery and storage as their top business priorities.

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Channel partners will play a key role in pushing out HP's SMB strategy, Turner said. HP has about 167,000 channel partners worldwide, with a huge percentage focused on SMBs, Renggli said.

Although Renggli was not specific about future plans, he did say HP would soon announce news about its partnerships with its top five global independent software vendors, including Microsoft and Oracle Corp.

Let us know what you think about the story; email: Kate Evans-Correia, Senior Director, News

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