Yesterday, HP reported that it is combining its Imaging and Printing (IPG) and Personal Systems Groups (PSG) into a single unit; consolidating Global Marketing and Communications; and realigning Global Accounts Sales. Here is an excerpt from IDC's opinion on this significant shift in one of the world's largest sales and marketing organizations: (Click Here for the full IDC Link; Click Here for HP's original press release)
"Executive Vice President Todd Bradley (previously the Executive VP of PSG) will lead the newly created unit. In addition, HP announced that its Global Accounts Sales organization will join the newly formed Enterprise Group (includes Enterprise Servers, Storage, Networking and Technology Services) and be led by David Donatelli. HP also announced it will unify its global marketing functions across business units under Marty Homlish, Executive Vice President and Chief Marketing Officer and bring together HP’s Communications employees worldwide under Henry Gomez, Executive Vice President and Chief Communications Officer. Taken in totality, today's announcements underscore that HP is committed to its high volume businesses and is focused on driving cost reductions and synergies across similar business units and horizontal functions in order to drive profitability which will allow for more investment for growth and shareholder value.
Unifying marketing across PSG and IPG as well as across HP overall will not only improve efficiency but will also enable greater impact of marketing on HP's business success. In today's hypercompetitive environment, multi-billion dollar organizations must excel in three key marketing-related areas to optimize customer creation: brand awareness, demand generation and alignment with sales and channels. In addition, HP now has the opportunity to identify where to unify organizational structures and related initiatives across these areas, without diluting the focus on key customer segments. IDC research has shown that complex marketing organizations with multiple product lines typically have many areas where redundant or over-lapping marketing apparatus can be eliminated, through the creation of shared-service centers. Unifying these functions under single leaders is a good start.
By bringing sales under Dave Donatelli, HP is making a prudent move. Donatelli brings a strong culture of sales (from his previous roles at EMC) to an organization that is selling ever more complex offerings into a sophisticated group of WW customers. Under Mark Hurd, HP added to the sales force to more deeply penetrate large customers. However in the last 24 months, HP’s set of offerings (and sales approach) has become more complex – particularly in the enterprise. We believe HP needs to find its voice in the enterprise and then energize the sales force to re-educate customers in how to think of HP and the new kinds of solutions it offers to meet today’s IT challenges. This will be a tough process, but as HP’s portfolio evolves, so must its approach to sales.
In total, these moves are consistent with what CEO, Meg Whitman, indicated in HP's Q1 earnings call - that the company must stabilize its financial performance to drive the profit necessary to invest and produce investor returns. She articulated three focus areas: 1) execution (systems, processes, and people, including supply chain, SKU reduction, sales tools/productivity and go-to market), 2) investments in all the businesses that should have been done to stay ahead of trends, and 3) addressing industry shifts (profit pools that are under pressure must be offset by investments in emerging areas that are growing fast in areas such as cloud, security and information management). In the near-term, the announcements today are targeted to reduce costs and enable investments.. However, beyond the next 2-3 quarters, as the savings are recognized and proper analysis and execution are implemented, items 2 and 3 are expected to be addressed as these realignments produce results. We address these below, as well as the critical matter of what it means for IPG strategy going forward.
. . . As Meg Whitman stated last quarter, “it took HP a long time to get into this situation, and it’s going to take a long time to get out”, this is an important first step. It will be a long process to unlock the synergies between these businesses, and there’s a risk that the fundamental differences in the businesses will limit some potential progress, but in the long run, this will allow HP to release expense dollars to drive long term innovation and shareholder value."
By: Crawford Del Prete, Angele Boyd; Danielle Livitas; Richard Vancil
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