Partners welcome HP's move to merge its IPG & PSG divisions

In an effort to drive profitable growth for the entire company, Hewlett-Packard (HP) has announced the merger of its Imaging and Printing Group (IPG) and its Personal Systems Group (PSG). The two businesses will now be combined into a new unit, called the Printing and Personal Systems Group. The new group will be headed by Todd Bradley, the executive vice president of PSG.

HP said that by merging the PC and printer units, it will streamline its supply chain, achieve cost savings, and will be better able to reinvest in the business. According to HP, the merger will also allow it to rationalize sales, customer support and supply chain operations.

"This combination will bring together two businesses where HP has established global leadership. By providing the best in customer-focused innovation and operational efficiency, we believe we will create a winning scenario for customers, partners and shareholders," said Meg Whitman, CEO, HP.

The industry believes that the newly formed Printing and Personal Systems Group will likely have bigger profit margins. And it will especially benefit PSG, which till last year was on the verge for a spin-off.

Commenting on this development, Prasanto K Roy, Chief Editor, Cyber Media, stated, "I believe this is a positive step, leading to the simplification and better alignment of its internal structure with its customer-facing groups. Customers, especially large enterprises, didn't really care for HP's internal structures and issues, or having to deal with multiple organizations."

"This should lead to a simplified structure that is more customer-friendly, apart from cost savings from a 'rationalized' sales, supply chain and support. The new, clearly defined Enterprise Group also simplifies the structure further," opined Roy.

From the Indian market perspective, this move seems to be quite significant for both the PC and printing and imaging industry. As per The DQ WEEK's market report for the year 2010-11, out of HP India's total revenue of Rs.19, 022 crore, PSG division accounted for 32 percent (approx. Rs.6,087 crore) while IPG accounted for 22 percent (approx. Rs.4,185 crore). Taking cue from the data mentioned above, post this merger, the combined revenue from the newly formed group will be around Rs.10, 272 crore (54 percent). This is nearly double than its main competitor, Dell, who clocked Rs.6,439 crore in India in the same period.

"There is, however, concern about how smooth this transition will be for the channels, given the different channels and business models in use for PSG and IPG. HP needs to take the channels into confidence and address their concerns urgently, given its ambivalent track record of communicating its structure and plans to channels and customers," pointed out Roy.

The channel partners of HP India have welcomed this move by the company. They believe that this will definitely create a win-win situation for all the stakeholders - be it the company itself, partners, as well as the customers.

Ketan Shah, MD of Bengaluru-based Kruthicomp, said, "By deciding to merge the IPG and PSG divisions, HP has taken a very positive step towards keeping the customer focus and gaining their loyalty. Due to various brands available in the market, the customer focus has got diverted. Here, the customer will get a single focus from the partner on the complete range of IPG and PSG products. Besides, partners like us who are dealing in both PSG and IPG products will certainly benefit from this move. We will get to see the changes from H2 onwards, as HP's H1 ends in April. From the market dynamics point of view, the focus on HP product portfolio will increase because the tier II and III partners, who are dealing with end customers, will give a complete package. Hence, this will led to increase in partners loyalty as well as customers loyalty.

Adding further, Shyam Modi of New Delhi-based Modi Peripherals, one of HP's leading partners in the country, stated, "It is certainly a good news for the HP partners like us who deal in both IPG and PSG products. Post this merger, we can sell both products under a single package. And we all know that HP's IPG was not doing well in the market but this move will certainly lift the company's IPG business. With this merger, we can achieve cost savings and in turn can improve on profit margins."

In another significant move, the company announced that Vyomesh Joshi, executive vice president of IPG, is retiring after a highly accomplished 31-year career at HP. Under Joshi's leadership, IPG has grown revenue from $19 billion to $26 billion, and doubled its operating profit to approximately $4 billion.

Additionally, HP also announced that it will merge the Global Accounts Sales organization with the newly named HP Enterprise Group, which will be headed up by David Donatelli. This business division includes enterprise servers, storage, networking and technology services.

"This should lead to a simplified structure that is more customer-friendly, apart from cost savings from a 'rationalized' sales, supply chain and support. The new, clearly defined Enterprise Group also simplifies the structure further," opined Roy.

From the Indian market perspective, this move seems to be quite significant for both the PC and printing and imaging industry. As per The DQWeek's market report for the year 2010-11, out of HP India's total revenue of Rs.19, 022 crore, PSG division accounted for 32 percent (approx. Rs.6,087 crore) while IPG accounted for 22 percent (approx. Rs.4,185 crore). Taking cue from the data mentioned above, post this merger, the combined revenue from the newly formed group will be around Rs.10, 272 crore (54 percent). This is nearly double than its main competitor, Dell, who clocked Rs.6,439 crore in India in the same period.

"There is, however, concern about how smooth this transition will be for the channels, given the different channels and business models in use for PSG and IPG. HP needs to take the channels into confidence and address their concerns urgently, given its ambivalent track record of communicating its structure and plans to channels and customers," pointed out Roy.

In another significant move, the company announced that Vyomesh Joshi, executive vice president of IPG, is retiring after a highly accomplished 31-year career at HP. Under Joshi's leadership, IPG has grown revenue from $19 billion to $26 billion, and doubled its operating profit to approximately $4 billion.

Additionally, HP also announced that it will merge the Global Accounts Sales organization with the newly named HP Enterprise Group, which will be headed up by David Donatelli. This business division includes enterprise servers, storage, networking and technology services.