HP Administrative Moves Bring It Into the 21st Century

 
 
By Chris Preimesberger  |  Posted 2012-03-21
 
 
 

We have a few observations about Hewlett-Packard's internal reorg to combine its printer and PC businesses, something the company has needed for a long while.

For starters, it looks like Hewlett-Packard's new CEO, Meg Whitman, is making some moves that will help the venerable but embattled company in the long term. There will be varying opinions on the direction she takes, but we think these are moves for the better€”both for the short and long term.

Why? Because like data centers themselves, companies are now converging internally to become more efficient. New-generation Web services companies, for example, are born with this knowledge.

These new IT-driven enterprises already know they have access to software and cloud service tools that enable fewer people to do more work, more efficiently. Smart old-line companies now realize this, are moving off the well-worn paths of the past, and are making moves toward consolidation like the ones HP announced March 21 that bring them into the 21st century office culture.

Because both the PC and printer businesses were profitable but had diminishing returns last quarter, it's not yet clear to many investors how combining the two businesses will help deal with broader market changes -- such as dealing with the rise of tablet PCs -- other than straight cost-cutting.

Whitman, who came to HP after a successful CEO stint at one of those new-gen Web services providers, eBay, has to prove to HP's investors that she is making the right moves. She will get that chance this afternoon at her first HP investor meeting.

Corporate Cultures Rapidly Evolving

Back to company culture for a minute, because this all ties in with the consolidation plan. The days of the single-service office admin are long gone, or they at least should be. Multitasking is the norm; cross-office interaction is enabled by new internal social networks and wonderful new collaboration software packages. Document storage and HR services in the cloud are now commonplace. HP has operated in silos for years; those will be going away.

And here's another sign of the times: We'll soon see if HP joins the growing list of companies that are doing away completely with private offices for managers.

More and more companies are finding out that cubes for everyone€”well, maybe slightly larger cubes for higher-up managers€”work out much better in a lot of ways for the enterprise culture. Physical barriers disappearing also have the effect of breaking down invisible barriers between various levels of employees at a company, which leads to better sharing of information and conversation.

It's much better for overall morale, too. If two or more people really need to have a private conversation, they can move into a meeting room specifically for that purpose. We'll see if the HP culture freshens up to that level.

The bottom line on the culture change is this: When ideas and hard information flow quicker and more easily from one person to another, that's when innovation tends to happen. This is how the open source software world has operated for decades, and that community is largely responsible for much of the new-gen IT innovation of the last 20 years.

Printers, PCs All in One Bucket Now

Does it make sense to combine such large divisions as printers and personal computers into one big bucket? After all, HP's Personal Systems Group (PSG) brings in more than $40 billion per year (with $4 billion of that actual profit), and printers brought in $25.8 billion in the last fiscal year. By the way, these two divisions represent about half of the corporation's $115 billion yearly revenue. 

Those are huge businesses. Due to economies of scale, any kind of streamlining at all will save the company millions of dollars right on the bottom line. This is what HP's investors need to see, and the sooner the better.

The HP moves announced March 21 come at a time when sales of printers and ink, once HP's lifeblood, are falling as people increasingly share documents and photos online. HP, the world's No. 1 maker of personal computers, is also facing declining PC sales as people turn their attention to tablet computers and smartphones.

HP has already trimmed away its Palm Computing hardware division. That was a major decision handled by the prior CEO administration in 2011.

A big winner we see out of all these changes: Former storage head honcho David Donatelli, who now runs both HP global sales and the enterprise businesses. If someone were to ask who's in line to be the next CEO, well, he'd be an obvious candidate.

So CEO Meg Whitman and the HP board of directors had to take some serious actions, and they will have some 'splaining' to do at the HP shareholders' meeting later today.

Now we'll see how it all fits into the HP Way.

Chris Preimesberger is eWEEK's Editor for Features and Analysis. Twitter: editingwhiz

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