HP split imminent, but will it be a clean break?

HP split imminent, but will it be a clean break?

Why HP’s separation is not quite a consumer and enterprise split...

For those living on another planet and unaware, HP is to split into two parts where HP Inc takes the consumer devices and the printing businesses, and Hewlett-Packard Enterprise (HPE) takes the rest.

In addition, HP Labs, the research and development arm, will also be split.

Unsurprisingly, the recent HP Discover 2015 conference in Las Vegas was mainly concerned with the split but gave little away in terms of why this was happening and what the expected benefits will be, other than high-level objectives such as agility and improved industry responsiveness.

“Talking privately to HP staff there was an upbeat mood, and it does look to Ovum on the surface like this is the unwinding of the “mistaken” purchase of Compaq some years back,” observes Michael Azoff, research analyst, Ovum.

“However, the bundling of the printer business into HP Inc will give it a valuable cash cow, and one with a long future given the prospects for 3D printing.”

For Azoff, where that leaves HPE is therefore a valid question.

Rumours abound in the press that a major acquisition will take place after the November 1, 2015 official separation (an internal, “test run” separation will start from August 1), and the expectation is that such an acquisition will clarify the logic of the split.

And perhaps more crucially, when looking ahead, Azoff believes that HP’s split is not quite a consumer and enterprise split.

“Although HP Inc is touted as a consumer-facing business, about half its printing business is industry-facing,” he explains.

“Moreover, the anticipated 3D printing boom will start in manufacturing, not the home. In addition, the printing business is already a good exploiter of the Internet of Things (IoT), or at least the ‘Intranet of Things’.”

As explained by Azoff, the ‘Intrante of Things’, is Ovum’s view of the current phase of IoT which is mainly internal facing as businesses exploit the internet across their product line but not beyond).

“Through IoT HP already knows when printers need ink to be replenished, when the device needs a service, which part needs replacing, and so on,” Azoff adds.

“HPE’s IoT focus, at this stage of its evolution at least, will be on big data analytics opportunities.”

Can HP Software shine?

According to Azoff, HP has been attempting to realign itself around the growth area of enterprise software for some years, and with HPE it will have a sharper opportunity.

HPE will inherit HP’s market-leading strengths in software testing and application security, and if it markets this as a multiple lifecycle approach, combining application development, testing, and security lifecycle management, this will be a clear differentiator.

“The market has so far resisted such a combined approach, mainly due to these activities existing as separate silos,” Azoff adds.

“However, agile, DevOps, and IoT, have broken the silos and application developers increasingly need to have an understanding of all three areas.”

Similarly, Azoff believes HP has a strong foundation in software relating to information management and governance, infrastructure and service management, security, and to a lesser extent cloud, but has more to do across these areas to keep up.

“At one time HP used to say its strategic position was to only be in any market where it would be one of the top two players,” he adds.

“If this is its corporate position post-split, HPE will have to continue its investment program with significant clarity and vigour.”

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