Is this your toughest assignment?
I’ve never worked so hard as I have in the last six weeks! But otherwise, I wouldn’t call it my toughest assignment ever. Because of that proxy fight so much time was available since the announcement and so much work has already been done in the previous months that right now the job is really more of implementation than of strategizing
From the top positions named, it looks like more of a Compaq takeover of HP India… How did Compaq’s much stronger position in India change things?
Well, I don’t think [the HR announcements were] so different in India. If I recall, both USA and Australia saw three of the four business unit heads coming from Compaq. It has varied from country to country, depending on the available structure and competencies of people.
Still, HP India is taking over what is obviously a far stronger systems brand.
Most of the Compaq sub-brands are going to used under the umbrella HP brand. So it’s now HP Proliant, HP Presario, HP iPaq, and so on. Worldwide, our Intel range of products will retain the Compaq alongside the HP brands. In the high-end storage products, we’ve kept both HP and Compaq product lines. If a customer wants 10 TB of storage, the HP products would be more suitable, but for 2 TB upgradable to 10 TB, the Compaq ones may be better. We now have what neither did earlier: an end to end storage solution.
What about the server side?
On the Unix side, the move is toward the Itanium. By 2005-06 Alpha Tru-64 and HP-UX will converge onto the Itanium platform. By that time, Itanium servers will stabilize, supporting multiple OSs, and prices will fall. On the high end, we retain the very successful Himalaya servers, now called the HP NonStop Servers. The non-stop kernel (NSK) will also get ported onto the
But what happens to branding? Digital had a far stronger brand in its VAX/VMS servers, but who hears of them today? Or of Tandem?
True, you might not hear of VAX/VMS systems, but they’re very much around! The high end server market is based on application availability, volumes, affordability and cost of transaction. Even today 60% of the world’s fund transfers and 70% of forex trading happens on VMS-based systems, 15 of the world’s top 16 stock exchanges run on Tandem. These products will not fade away quickly. But you’re right. Ultimately, the Compaq brand will fade away, in the long run. It has to.You cannot have two strong brands competing internally.
What will we see in the next six months in terms of product lines and the integration process?
Many things. For instance HP OpenView’s integration with Compaq’s TEMIP (telecom network management software); increased focus and continuing investments in the NSK and VMS based systems; and of course porting of more operating systems onto the Itanium. You’ll also see more innovation on front-end access devices. A lot more investment in handheld devices and mobile technologies and more products in the digital imaging and scanning side coming in the next 12 months.
Basically: digital imaging, mobile technologies, software and moving of operating systems to
What about the channels? HP and Compaq India had a very different channel strategies.
That will come from how our customers are going to be organized. First we have large corporate customers or our “Incoming Accounts”-about 250 worldwide, of which 50 operate in India. Then we have Enterprise Accounts: 4,000 worldwide, and 50 in India, such as Reliance and Tata Steel. Then there are our Commercial Accounts – 150 mid to large size customers in India. Fourth, we have the small and medium business (SMBs) accounts, covered mostly by the resellers channels. Finally, the small office and home office customers are covered by the retail side of the business.
Internally, now, each of the four business divisions are responsible for one segment of the market, apart from their own product lines. The imaging and printing division will handle retail and the entire go-to-market strategy for the SOHO segment; the personal systems Ggroup will have additional responsibility for all channel partners and resellers, the Enterprise Systems Group will be responsible for roughly the top 200 accounts–all corporate, enterprise and large commercial accounts, apart from their own area of servers, software and storage. All this will build teamwork between business groups, and also ensure that clearer responsibility-we won’t have four of us going and selling to one customer.
What happens to the reseller channels?
The channel will continue to handle the commercial accounts. Some of these accounts may be covered by HP, but the fulfillment will continue to happen through the channels. Depending on deal size and complexity, HP may take ownership of some of these accounts. But I think 70-75% of the business in the new HP will continue to go through partners.
Resellers are apprehensive about a post-merger “rationalization of channels”..
We don’t want to rationalize the channel. The channel will probably rationalize itself. The environment, the prices, etc, will be able to take care of it. In a smaller market, more players could be a challenging thing. But, well, three years ago we thought Bangalore could have only one retail outlet. Now Compaq has hundreds of them in over a hundred cities…together, probably 700-odd retail outlets to sell HP products. Each retailer now has a wider range of products to sell, and if he plays his cards right, should be more profitable.
Do HP ISO and HP eGlobal remain distinct?
Yes, the subsidiaries remain distinct, with their separate heads. I do have an advisory role there, but more of value addition than control.
Will Digital remain distinct too, or will it merge with HP ISO?
We have a unique situation in India. Everywhere else, when Compaq took over Digital it was a 100% takeover. Digital India “demerged” itself from Compaq three years ago, turned to software and then renamed itself Digital GlobalSoft. It is probably the only 51% JV of its kind with Compaq. While HP ISO is more engineering and IP oriented, Digital is largely a solutions company. Digital Globalsoft brings a great deal of value with it, and I think HP would like to [keep its identity].
There’s trepidation among HP employees. HP has said 15,000 jobs will go-how many of those will be from India?
Two-thirds of the organization is in place, and the rest will be in place latest by July 15, including issues like who manages what accounts. Neither company recruited many people last year-we just recruited one in Compaq India! And we run a tight ship. So I expect the restructuring to affect about 5 to 10% of the workforce across both permanent employees and contract workers.
HP India used to outsource heavily. Will that change?
No. We will continue to outsource the non-core areas.
How will the two very different HP and Compaq cultures come together?
First, HR is conducting a “fast track program” for getting all of us, from both the companies, acquainted with the new cultural environment, this month. But the fact is that in the past two months, I’ve found that this part of the integration has been far easier than I anticipated. We are able to understand and relate to each other must faster than we did for instance during the Compaq-Digital merger, where the two companies were selling completely different kind of products . Here, we have common products, experience, background. It’s been much easier. And there’s been minimal overlap of people – perhaps less than 5%. For instance, HP did not have a large-account team, and merging that with Compaq’s team was easier.
How was 2001-02 for Compaq?
Compaq did well in systems integration, network integration and IT outsourcing. But what really helped Compaq was the services business which grew 32%. Telecom and financial services were the big verticals for us, and we did very well in the export-oriented units space. With some process changes in our manufacturing plant we were able to cut lead time to delivery. Plus, having a plant in Bangalore helped us a lot in terms of both transports and logistics as well as the ability to ramp up quickly. As a result when we got a volume opportunity we were able to react faster.
How will you remember the year?
Basically, we were firing from all cylinders last year. We had to. It is personally the toughest year I have seen in the industry. And irrespective of when the upturn happens, fact is that gross margins are not going to be the same ever again. This industry has changed for ever.
Sarita Rani in Bangalore