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HP Enterprise Services: Getting into its Stride in EMEA

In March, after attending HP’s annual analyst event in Boston, we wrote a short piece on how HP Enterprise Services is building its “Advise, Transform, Manage” Positioning (see: http://bit.ly/U0oJ8p)

Last week, we attended the HP EMEA analyst event in London, where the key theme was the “One HP” approach to market. NelsonHall’s interest is HP’s Enterprise Services (ES) division. We are impressed at the speed and scale of progress that has been made in HP ES EMEA in the last 12 to 18 months. In EMEA at least, the “One HP” go-to-market model is much more mature than when it was first presented a year ago.

So what initiatives are helping this?

There are many, but to give a few examples:

  1. Revitalization of sales force: in the 16 months since the re-hire of Larry Stack in February 2013 as global head of ES sales, there has been a significant refresh of the sales force, with HP ES recruiting more personnel capable of more proactive selling, particularly for projects and newer services. A much larger proportion of the sales force (nearly a third) is now deployed on proactive activities (new logo clients; new revenue streams in existing accounts; new opportunities through partners). This recent shift is partly a reflection of the fact that a major focus in HP ES globally in FY 2013 was on defending some major renewals – nevertheless, it indicates HP ES attempting a major change in go-to-market
  2. Deployment of Client Principals for strategic accounts, presenting one face of HP to the client. There appears to have been substantial progress here in terms of visibility (the CP has a view of everything that HP, across all divisions, is providing into that account), the ability to promote HP technologies (larger accounts have a lead technologist), and business planning (all major accounts now have a three-year account business plan). With strong integrated key account management in place, there should be no more incidents where different parts of HP submit proposals to a client for the same opportunity. But this initiative, of course, requires a massive culture change across HP divisions, not to mention more sophisticated compensation plans and good client visibility. Is HP fully there yet? Probably not in such a short period of time, but HP is clearly tackling this critical aspect of “One HP” head on. Changing well established behaviors in likely to be a particularly hard challenge, but one that is critical to crack
  3. Exec sponsors of key accounts - an initiative that was apparently instigated by the EMEA region - appears to be working well, both in steadying accounts that were troubled, and, significantly  in some cases, in supporting some major expansion in the account. The exec sponsorship initiative (which includes Meg Whitman for the very largest accounts)  also helps in driving business conversations with clients at the C-suite level
  4. Executive briefing centers (EBCs): HP currently has just one, in Palo Alto, and is planning to build ones in its EMEA and APAC operations. EBCs are tech showcases, but also provide the HP with an arena to have business conversations with clients and prospective clients, with a heavy focus on how the “new style of IT” can assist them in evolving their organization to address different sector dynamics
  5. EnVision workshops: these 2/3 day workshops tend to go hand in hand with EBCs. This is a huge time investment required of a client, but HP ES highlights the output is substantive. Now deploy NPS across business, highest NPS score the Envision team… with the set-up of regional EBCs, the number of one-day sessions is likely to increase
  6. Investment in cloud-ready data centers: HP EMEA now has 18 data centers running virtual private cloud (VPC) environments, including seven high-availability paired dual-core DCs, of which five are in EMEA. This reflects country-specific data privacy requirements within EMEA, but it does indicate the importance of EMEA to HP ES.

Overall there has been a clear drive at HP ES to change the nature of its dialog with clients to have more of a business-focused discussion. HP is never going to be a consultancy but it is on occasions bringing in management consultants (Deloitte, PwC, Booz, McKinsey, also Accenture) as partners.

And is there any evidence of success (the proof in the pudding) yet?

Some client examples were provided at the event where HP is bringing capabilities from several divisions (Enterprise Group, Software and ES) into an account. One of the case studies provided was of a customer management services BPO contract that has expanded to include a broad range of HP services and technologies.

But these are anecdotal. What about the overall picture? HP ES in EMEA has not been impacted to the same extent as the Americas by the ramp down of four major contracts, but it is having to contend with its own problems, including the U.K. government’s attitude to large ITO deals, nearly all of which are being broken up into towers or “Lots”.  And some of the tier 1 Indian outsourcing service providers are aggressively targeting ITO renewals in Europe.

But HP ES EMEA management was buoyant: the region has won some significant ITO deals that are not yet in the public domain. If HP can demonstrate topline growth, in constant currency, in EMEA in FY 2015, this would be in line with the scenario Meg Whitman laid out back in October 201 of FY 2015 being the ‘Acceleration’ year, a prediction that at the time looked hopeful.

What is HP ES doing to improve margins and delivery?

  1. HR: HP EMEA is most of its way (we estimate around two thirds) through a major rightsizing: something which has now mostly been done in the Americas. There is attention to flattening the labor pyramid and on reskilling for newer technologies, both themes that are evident in most vendors currently. HP ES has deployed WorkDay (we imagine this is the largest in the world to date, by some way). And the benefits are not just internal: HP ES is already having discussions with clients about its experience -- experience that provides potential opportunities for Workday implementations, and feasibly in the longer term, for an HR BPaaS service based on the Workday platform.
  2. There has been a lot of work on implementing a common set of processes between ES and EG and Software, for example when buying servers to support an outsource engagement

What is less developed?

In the new “Advise-transform-manage” positioning, one of the slogans is of HP ES as “a safe pair of hands”. With the number of red accounts now down to a handful in EMEA, this is not a claim that is aspirational (as claims so often are) as far as the “manage” element is concerned.

HP ES admits that some assembly is still required in the “advise” element. It appears to be working with some management consultancies on an ad hoc basis… there may be more formal go-to-market partnerships, but in sectors here it lacks substantive industry insights about the future of that industry or viewpoints about current trends, HP ES  remains vulnerable in situations where a client is looking for a champion-challenger in a transformative outsource.  

What should we expect to see happening in HP ES EMEA next?

There will, of course, be many new and ongoing initiatives, but two in particular are worth pointing out:

  1. Possibly further organizational streamlining, to remove a management layer. This would strip out some overhead costs and should also help improve responsiveness, accountability and visibility.
  2. Development of industry IP: HP ES is currently looking at industry IP it already has across EMEA. Some of this, for example in the healthcare provider sector, might be transportable. But we might also see some inorganic growth over the next year or so, to enhance software IP in target verticals. This “string of pearls” acquisition strategy would be a first for HP. Equally notably, it something that seemed very unlikely just two years ago, when HP ES was primarily the “services attach” arm to HP enterprise hardware. And it would be a shot in the arm for HP's applications services business.

(We will be updating our Key Vendor Assessment on HP ES later this month. This 90+ page document is the most comprehensive profile of HP ES’ strategy, financials, capabilities, contract activity etc. available in the market. For details, contact [email protected])

(see also HP ES Turnaround Strategy Update - New Style of IT, New Style of HP ES” http://bit.ly/1zm5Eht)

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