HP's possible exit from PC market concern for NZ CIOs: analyst

IDC says IT departments will be re-evaluating their relationship with HP

IDC says Hewlett Packard’s signal that it may exit the PC market should make New Zealand CIOs re-evaluate their procurement strategies.

HP's announcement that it will discontinue the sale of its new TouchPad tablet (launched in New Zealand on 28 July), abandon devices based on the webOS platform and possibly sell off its Personal Systems Group (PSG) — which dominates the PC market internationally — will have sent shock waves around the local user community, says IDC senior analyst Trevor Clarke.

According to IDC, PSG is the market leader with 34 percent of the New Zealand PC market in 2010.

"Given the process is expected to take 12 to 18 months to complete, there will be a lot of enterprise customers and channel partners in Australia and New Zealand that will be commencing a serious re-evaluation of their relationship with HP today," says Clarke.

"Whilst supply of HP PCs and other PSG offerings, including associated services, will not be affected in the short term and it will be business as usual, we expect this announcement to shake up relationships in the market over the next six months. PSG may come out of this process a stronger brand, but it faces considerable risk in the short term."

IDC associate director Matt Oostveen says a large-scale acquisition of HP hardware has become a “riskier proposition” for those handling major government procurement projects. He says a product’s roadmap is a key part of a procurement decision and while previously HP “ticked all the boxes”, the announcement that it might sell PSG now creates uncertainty.

Oostveen says that while IBM made a similar move in 2005, when it spun off its PC business in 2005, this announcement is different because HP is only signalling it may sell PSG, it hasn’t signed any deals (at least, none that are public knowledge) yet.

At the same time as abandoning the tablet market, HP also announced it will acquire analytics software vendor Autonomy for US $10.3 billion.

Oostveen says this is an indication that the company has chosen to focus on software and services, which provide far greater margins than hardware, says Oostveen.

This reflects the move around the globe towards outsourcing services, as CIOs and IT managers streamline the delivery of ICT across their organisations. “For every dollar an IT department spends on hardware, they then spend $8 on hardware maintenance,” Oostveen says.

He says HP’s signal it may exit the PC market altogether makes sense considering the background of its CEO Léo Apotheker, who was previously head of SAP and who was appointed in November last year.

But it’s a bold move, as previously it was possible for HP to ‘own’ the customer relationship end to end – from the datacentre to desktop.

Oostveen says it was probably too late for Apotheker to “unring the bell” on the failed TouchPad, but as to why HP launched a tablet, only to remove it with months, he couldn’t give a definitive answer. “I think we will be poking through the ashes of this one for some time.”

On the back of HPs announcement, IDC is expecting a lot of activity in the New Zealand market “as competing vendors look to tie up relationships with disgruntled HP channel partners, retailers and employees.”

Computerworld has sought comment from HP in New Zealand.

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