HP CEO Dion Weisler says it seems like a lot longer than four years since he took the helm of what was then a declining PC and printer business with outdated products and a bleak future.
"Four years in this business is like 28 years in any other business -- it operates in dog years," said Weisler, who along with his executive team have refashioned HP into a company with innovative products that are redefining the customer experience in both the premium systems market against Apple and in the A3 copier replacement market against Xerox. "As a company, we are incredibly different than what we were back then. The main thing we did is we reinvented ourselves in every single area of our business."
Reinvented indeed. HP was considered a laggard with lackluster me-too products, a dearth of innovation and anything but a leader in product design when Weisler was named the chief of HP's Printing and Personal Systems Group in June 2013. Today the company is winning commercial solutions and consumers – including millennials -- for what by all accounts is flat out the best product portfolio in its history.
That has translated into quarterly results for the quarter ended July 31 that were off the charts. HP reported a 10 percent increase in sales, with the PC business growing at an almost unimaginable 12 percent. The printer business delivered its second consecutive quarter of growth -- helped in part by a "stabilizing" of the all-important printer supplies business.
HP bested the overall PC market unit growth by 9.5 points year over year in the second calendar quarter, remaining the No. 1 global PC market share leader with 22.8 percent share, said Weisler. That puts HP on track to soon ship one out of every four PCs in a $333 billion market.
Just as impressive, HP is beating Apple in the highly profitable premium market segment. From the second calendar quarter of 2015 to the second calendar quarter of 2017, HP has grown its premium segment systems market share 5.4 points. During the same period, Apple's premium market share declined 8.5 points. Apple would not comment on the share decline.
In the printer business, meanwhile, HP has been out of the gate fast with its A3 product portfolio -- a $55 billion market where Xerox has long been considered a leader. HP said A3 sales are ramping and the sales pipeline is exceeding initial expectations.
There is no "magic pill" for the transformation that has taken hold at HP over the past four years, said Weisler. It was born out of taking a "hard look in the mirror" and listening to customers, he said.
"We went to work on the hard things that matter most to our customers, whether it be industrial design or security or the ability to have the right portfolio where the heat is in the market and where we can add value to our customers," added Weisler.
Innovation will be front and center this week at HP Reinvent World Partner Forum in Chicago Sept. 11-13.
HP is kicking off the conference with an extension of its A3 portfolio with two new platforms in a number of different configurations for both transactional and contractual channels.
In enterprise printers, HP is unveiling a breakthrough embedded security feature referred to as HP Connection Inspector that monitors outbound network connections and stops malware. HP said the new software, in effect, learns what is normal network traffic and then stops suspicious packets.
HP Imaging and Printing President Enrique Lores said the company's printer software security advances are a major differentiator versus competitors. "We have been doing a lot of work to analyze what happens with printers when they are hacked," he said. "By analyzing that and understanding what happens and how they are attacked, we came up with this concept of monitoring the network and shutting the printers down. It comes from a lot of analysis and a lot of work."
HP also is unveiling HP Roam – a new universal printing offering that enables business professionals to securely print in another company location or while traveling. "This is a new way for business professionals to get access to print," said Lores. "The impact is going to mean more print and more printers sold. Partners are going to be able to monetize this opportunity because it is going to increase the number of pages printed and enable more printers to be sold to business customers."
Another major advance: the addition of artificial intelligence and machine-learning features to HP's Smart Device Services platform, which is featured on HP's A3 portfolio. "We have improved dramatically our ability to do preventive maintenance so we can detect what parts will be failing based on actual data," Lores said. The net impact on partners, he said, will be a "continued reduction in service costs, which will translate into greater margins for them or in the ability to be more aggressive in deals when they sell HP printers."
HP is going to unveil even more services-oriented tools in the A3 portfolio down the road aimed at helping partners drive more contractual managed print deals, said Lores. He said the Print-as-a-Service business is growing five to 10 points faster than transactional sales. "When I look at what is the best opportunity to grow with us, it is clearly in the A3 space as we expand our portfolio and also in Print-as-a-Service," he said. "More and more of our business customers don't want to buy printers or supplies – they want to buy printing services. Offering those services is the best opportunity for our partners to grow."
Lores said the key message for partners at the conference is that HP has reinvented print and is growing the business. "Many companies will say the future of print is uncertain, unsecure or not predictable," he said. "We think the future of print is whatever we want it to be. And what we want it to be is a growing business."
The Device-As-A-Service Offensive
The biggest game-changer at the conference in the personal systems business is HP's relentless drive in the Device-as-a-Service (DaaS) market. HP Personal Systems President Ron Coughlin said DaaS will be a $60 billion market opportunity by 2020. "This is going to flip like managed print services flipped 10 years ago and we believe no one is positioned better than HP because, first and foremost, we are the most channel-friendly OEM in the industry," he said.
HP has staked out a leadership position with an all-out charge to dominate the DaaS market and it is paying off. DaaS orders are up double digits and over 50 percent of companies are evaluating or deploying DaaS, said Coughlin.
"My message is we have reinvented PCs together and we are driving growth together," he said. "Now we need to go conquer services together. We got lots of feedback last year in terms of what partners wanted. We conducted over 135 individual workshops with individual partners to make sure we heard their needs, to make sure we are customizing our offer, to make sure we are building into our offer what the channel partners need. I don't think there has ever been an initiative that has been so vetted, inputted and worked hand-in-glove with the partners."
As for the company's double-digit PC growth and the gain in the premium segment, Coughlin said it is evidence that HP has closed the gap with Apple on customer experience. "It is all about reinventing the PC," he said. "That has been very successful and it has driven a lot of the share gains."
Ultimately, said Coughlin, there simply may be no supplier that can provide partners with a better economic opportunity than HP. "Our raw growth rate combined with a positive mix shift to more profitable, higher ASP [average selling price] products is extremely attractive," he said. "We are a catalyst with an advantaged offering in areas like Device-as-a-Service and security that provide accretive margin growth areas that allow partners to move up the stack."
If that is not enough, Coughlin points to leadership in future growth areas including commercial market virtual reality, which is expected to be a $10 billion market by 2020. "Our nascent leadership in commercial VR allows partners to start developing a capability in a business that has decades of growth in the future and will ensure their growth and profitability for decades to come," he said.
Partner Sales Growth
Partners say the transformation engineered by Weisler and his senior management team is paying off in robust sales growth and opening the door to new opportunities like A3 and 3-D printing.
Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 119 on the 2017 CRN Solution Provider 500, said his HP business is up double digits as a result of the improved HP product portfolio.
The more innovative product portfolio is resonating with commercial customers, said Venero. "There is no question they needed to change in order to be a more formidable option for commercial customers," he said. "They have accomplished that by making sexier PCs and notebooks without forgetting about security. And they have also continued to move forward with a strong channel focus."
Future Tech recently closed a large multimillion-dollar global deal with HP's core client products – a testament, said Venero, to HP's product prowess and Future Tech's robust logistics capabilities. That deal, he said, is also a sign of the continued strength of the personal systems market. "There is no technology that is going to take over personal systems in their current shape or form," he said. "It is the single pane of glass that provides employees access to everything in a corporation. You can retwizzle or flavor the PC any way you want – whether it is a notebook or a 2-in-1 -- whatever the form factor it is alive and well. The client business for us remains a very healthy business."
At the same time Future Tech is driving strong growth in the core PC business, it has developed a comprehensive new business plan around HP's A3 and 3-D print business. "We are building a whole practice around A3 and 3-D going into industries like aerospace, defense and automobile manufacturing," said Venero. "This technology is going to provide major cost advantages for those industries. When we look at A3 and 3-D we see a total addressable market of billions of dollars. Whoever takes the lead in this market is going to capture major market share over the next 12 to 24 months."
Venero credits HP with thought leadership aimed at driving future growth with disruptive technology. "You need to be looking three to five years out to continue to be successful by bringing disruptive technology to the table that can be leveraged by the partner community," he said.
Harry Zarek, CEO of Compugen, one of HP's top enterprise partners, No. 63 on the CRN 2017 Solution Provider 500, said HP's transformation is also paying off in double-digit growth for his HP business in both units, average selling prices and strong accessory sales.
Zarek credits Weisler and Coughlin with an amazing product transformation in the personal systems business. "Coughlin in particular has moved the PC away from just a utilitarian device," he said. "He has done a fantastic job infusing a quality and aura around the brand."
HP has captured the zeitgeist with elegant and sleek systems, effectively reinventing the PC for the modern era, said Zarek. "There is a relationship between the quality of the products you are giving employees and how you motivate them," he said. "Many companies say their most important asset is their people and then they give them a lousy PC – a bad notebook. It is almost an embarrassment. I think organizations are realizing if they want to drive productivity, motivate employees and demonstrate how important they are, then they need to give them quality tools. That thematic view is how HP is beginning to positon themselves in the marketplace. It is not about cost-cutting, cost-cutting, cost-cutting. It is about how to drive innovation, creativity and getting people to collaborate better – how to motivate and retain them."
With Office of the Future, HP also is making gains in new modern collaborative workspaces. In fact, Zarek said, he has seen firsthand how old-line companies like legal firms are doing away with the old high cubicles that dominated workspaces in the 20th century. The companies moving forward with those new open collaborative workspaces are increasingly choosing HP devices, said Zarek. The HP Sure View security privacy screen has been particularly attractive to law firms, he said. "That attention to detail that HP is infusing in the product is making a difference," he said. "They understand the use cases and how people are using these devices."
Zarek said HP also has staked out the "leadership pole position" in the DaaS market. "We are focusing heavily on DaaS," he said. "It plays into all of the services capabilities we already offer. It allows us integrate all of that into a single service model. The as-a-service model is really the equivalent of cloud infrastructure. That is really what it is, but you have got to have flawless execution because you need to take on proactive accountability. The traditional services model on PCs is ‘if it is broken we will come and fix it.’ It is a reactive service. We need to make it proactive.”
Joe Hemani, founder and owner of Westcoast, a $3 billion United Kingdom distributor that has bet big on HP, said his HP business will be up 18 percent this year. He credits Weisler and the senior leadership team with an amazing transformation. "It is almost a crime to compare the pre- and post-Weisler era," he said. "It is a completely different energy in that company. I believe in the leadership team so much that I am putting my own dollars behind HP. They are hungry, energetic and driving the business in the right direction. I see an absolute will to win with quality products. There is a lot of momentum behind HP right now."
Just as important as the products, Hemani said, is the "channel trust" and engagement. "When you believe in a partner, and my team believes in that partner, they want to go out and win for them," he said. "The products are a given. The next thing is trust and engagement. If you get that trust and engagement without a whole lot of bureaucracy, everyone gets confident. And when you get confident, you sell."
The product and services growth at Westcoast is across the board in both commercial PCs and printers, said Hemani.
Hemani said he is not surprised by the Apple premium share gains. "The HP products are aesthetically pleasing," he says. "You want one of those products. They look so beautiful and adorable that they are almost edible. Ron Coughlin deserves a lot of credit. He brought really innovative products to market really quickly."
HP security features such as malware protection and self-healing BIOS are also resonating with customers. "Of course it is a big differentiator -- nobody else has it," says Hemani. "We show customers that there are a million instructions before the OS boots and that is where the malware gets in. HP absolutely has the most secure PCs and printers."
Westcoast is selling thousands of HP A3 printers, said Hemani. "It's a superb product," he said. "That product is as aesthetically pleasing as the laptops and systems. Customers are loving it. HP is winning against companies like Xerox and it has only been a few months since the product came off allocation. The real big wins from A3 will come next year."
Finally, Westcoast launched HP's 3-D printer line in the U.K. in June and in the first month the distributor sold six of the $350,000 printers. Westcoast reps are seeing a "wow" factor in the field when customers are presented with the 3-D printers, said Hemani.
Hemani said HP founders Bill Hewlett and Dave Packard would be "hugely proud" of the way Weisler and his team have brought back the entrepreneurial and community spirit that is the heart of the company. "Dion and his leadership team have kept the honesty and community spirit alive," said Hemani. "Bill and Dave were about community spirit. They wanted to make sure that socially they were responsible while bringing out good products that provided productivity and at the same time helped the community."
Reinventing HP By Embracing The Past
HP executives say one of the most remarkable aspects of the reinvention of the company is indeed the tight connection with the entrepreneurial drive and spirit of HP founders, who are credited with literally inventing the Silicon Valley ethos.
When HP celebrated its historic split on its first day as an independent company two years ago, Weisler invited scions of the Hewlett and Packard families to a dinner. Weisler's embrace of the two families was no small matter given the divisiveness of a shareholder fight that had pitted the families against the company when HP acquired Compaq.
HP's Lores -- a 28-year HP veteran who worked alongside Hewlett and Packard -- said the Weisler reinvention has, in effect, re-created the culture they put in place. "When you look at our values, the culture we are creating, how we behave, the aspirations we have for growth and innovation, what we are doing is not inventing anything new, we are really going back to our roots and going back to what we were when Bill and Dave created the company," said Lores. "This is the direction Dion has taken. This is why it has been so impactful. It is not creating something new. It is about making sure the values the company had were not lost despite all the changes and challenges. It is about making sure those values come to life again."
It is no small matter that the customer briefing center is connected to the original offices of Hewlett and Packard. "We bring customers through the original offices of Bill and Dave," says Lores. "We show them the past – the roots of the company – and then we take them to the future products to where the company is going in the future. What makes us different and better is the ability to merge our past and the values that we had with the future we are creating."
That type of cultural heritage is paying big dividends for customers and partners. That was recently brought home by a meeting that HP's Coughlin had with an executive from a major overseas channel partner who came to HP. "That executive and I spent an hour in Bill [Hewlett's] office talking for an hour," said Coughlin. "At the end of it, we both recognized how fascinating it was that we were talking about the future of our companies and how do we reinvent our offerings in the birthplace of technology. It was kind of a foot in the past and a foot in the future. It was a fascinating moment."
Coughlin said HP's values go back directly to its founders. He said that is a credit to Weisler. "It is not very often you get to define what a company is," he said. "Dion did a masterful job of taking his leadership team and having us step back and say: ‘What do we want this company to be?’"
Even Better Days Ahead
Weisler said he is most proud of the fact that HP's success is driven on the back of breakthrough products and innovation. "That is what make me the most confident," he said.
With all the recent success, Weisler is determined not to let the strong performance go to the company's head. "We are far from perfect and we will never reach perfection," he said. "We need to continue to raise the bar and we need to start by using our mouth and ears in relative proportion which the Lord gave them to us."
As long as HP remains "humble, listens to customers and continues to innovate, the company's best days lie ahead, said Weisler. "I couldn't be more upbeat about our future."