HP is emerging as a formidable No. 2 in the industry (in terms of sales) to IBM. The Register writes about its growth path:
In her keynote address at the analyst conference, Ms Fiorina talked about how the 1980s were about having stable, reliable (and relatively simple) IT systems, and that the 1990s was the era of the hot box, when customers chased best-of-breed technology to build client/server and then Internet-style computing infrastructures. In the 2000s, everything is about going digital, mobile, and personal.
“This is a profound change in the industry,” she explained. “The key technology imperatives are about simplicity, manageability, and adaptability. These trends are changing entire industries, and this is the world we built the entire company for.” She said that HP would bring the same focus on execution to selling products and services in this new technology era, as it did with the HP-Compaq merger.
While this is interesting, what Ms Fiorina really wants HP to do is get a bigger piece of the markets that the company plays in (PCs, servers, storage, services, and to a small extent software) as well as targeting emerging and nebulous markets such as digital media. Getting more share from where it is already playing is an obvious tactic, and there is apparently a lot of room for growth here for HP.
According to HP’s own estimates of the IT market, HP played in markets that comprised a total of $710bn in spending in 2003. The enterprise market, at $320bn, was about half of the total potential market for HP, but HP only had 8.4 per cent of that market. HP reckons it has the largest share of the $186bn market of small and midsized businesses, which is growing at 5.8 per cent compounded annually, but that share is still only 10.2 per cent. (The enterprise market is growing at about 5 per centannually, according to HP.) There seems to be less upside in the consumer market, which HP estimates was worth about $87bn in 2003, of which it had about an 18.6 per cemt share. The public sector business (healthcare, state, local, and federal governments) comprised about $118bn in opportunity, but HP only had a 7.6 per cent share. While getting market share from 10 per cent to 20 per cent is not as easy as getting from 5 per cent to 10 per cent in most markets, HP is one of the two largest IT suppliers in the world. If anyone has a shot, it is a company like HP. (Getting much beyond 25 per cent seems very unlikely in most markets.)
HP reckons it has about 23 per cent of the $98bn imaging and printing market, about 12.6 per cent of the $168bn PC business, about 16% of the $96bn enterprise systems business, and only 3.5 per cent of the $349bn IT services business. (Again, those categories are only for products and services HP offers, not for the entire IT sector.)
HP is also adding new markets that it believes can push the company’s total addressable market to $1 trillion, and by getting products in these new markets it can increase the IT spend in places where it already has customers. HP reckons that, in the 2003 market, security was worth $11bn, IT management software was worth $15bn, mobility products comprised $200bn in sales, and rich digital media comprised another $400bn.
HP’s share in these markets is very small, and this is what Fiorina wants to change. She also said that even the largest HP customers typically spend only 10 per cent of their IT budget with HP. She wants that number to go up, too. It’s all about cross-selling, upselling, and stressing the value of the full HP portfolio. This is easy to say but hard to do.