As HP pivots, partners reposition for future growth

Tian Chong Ng (HP) and David Tan (HP)

HP has unveiled plans to double down on partner growth amid a significant pivot in market focus, balancing core requirements with emerging ambitions to lay the foundation for future ecosystem growth.

Whether new product lines, industry sectors or business models, the technology giant is charting a fresh path forward armed with tradition but shaped by evolving priorities -- the axis is turning and the channel is waiting to capitalise.

According to Tian Chong Ng -- speaking to Channel Asia as managing director of Greater Asia at HP -- the vendor is “at the juncture of pivoting the business”.

While core business functions such as PC and print segments “remain attractive”, evolving trends in work hybrid coupled with constant improvements in technology have combined to create a “big tailwind” during the last two years.

Whether across Asia Pacific or the wider world, ongoing economic and societal roadblocks are turning industries inside out, upside down and back-to-front -- such instability naturally creates both opportunities and challenges for partners.

“The whole industry is changing,” acknowledged David Tan, head of Channels and Supplies at HP. “We saw the change in people's behaviour, the way they work with companies and the way the market has moved -- we think that the partners need to move along this journey.”

In response, HP has outlined six growth areas defined as “more modern and efficient” solutions, designed to help take the business to greater heights, reinforced by partner support.

Segments span 3D printing and personalisation; gaming; consumer subscription; workforce solutions; peripherals and industrial graphics.

“From a business perspective, we are a US$60 billion company looking to pivot to these new areas of focus, which will drive big double digit growth rates for us in the next few years,” Tian Chong noted. “And we are going to get there by organic growth, as well as mergers and acquisition [M&A] and our innovative technology to grow this portfolio of new areas.”

Sizing up consumer subscription

A core aspect of the revamped portfolio that will underpin HP’s business model going forward is consumer subscription, a monthly service currently offered via print called Instant Ink.

Designed for home use and small businesses, consumers with eligible HP printers can monitor print usage via an application to assess when ink levels are low to ensure replacement ink cartridges are mailed to users.

At the same time, in line with its sustainable agenda, HP has ensured the recyclability of the ink cartridge whereby consumers can mail back used cartridges in complimentary recycle bags provided by the vendor.

Tian Chong noted that a key benefit of moving to a subscription plan is that “hardware prices will be lower” and customers can select from various price plans “depending on printing needs”.

“Our vision is ultimately to offer HP devices to consumers on a subscription beyond print,” he added.

One such area that HP is looking to implement a subscription model is its gaming segment, in which the Omen and Victus line of products form key anchor points.

In February 2021, the vendor acquired the HyperX brand of gaming peripherals from Kingston for US$425 million in a bid to expand its gaming ecosystem, prompting a move beyond core print and PC devices. HyperX crafts a wide array of PC accessories, including the HyperX Cloud Alpha, alongside creating gaming-focused keyboards, mice, microphones, earbuds and Qi wireless chargers.

Tian Chong said that while gaming essentially represents a subset of the vendor’s PC segment, the division is “growing much faster than the overall PC market”.

“We see that gamers are two times more likely to refresh their equipment over time,” he noted. “They spend much more compared to the average IT person because they want the coolest technology, the latest and the best, and they spend a lot on peripherals.”

M&A drives hybrid work solutions

Heightened demand for peripherals is not exclusive to the gaming segment however, with the shift to hybrid work models boosting the need for tools and devices that enable collaboration and productivity.

Specific to workforce solutions, Tian Chong said the vendor is “putting together a managed print service and device-as-a-service” offering to create new levels of commercial value for enterprise and SMB customers in the process.

Additionally, the vendor has been building up its hybrid work portfolio through a series of acquisitions during the past 12 months, aimed at improving its workforce solutions and peripherals, which Tian Chong acknowledged as “big areas of growth”.

Most recently in March, Poly was acquired in an all-cash transaction for US$40 per share, generating a total enterprise value of US$3.3 billion -- a deal which was completed in August.

The blockbuster acquisition aims to accelerate HP’s strategy to create a more growth-oriented portfolio, further strengthening its industry opportunity in hybrid work solutions and positioning the vendor for “long-term sustainable growth and value creation”.

Meanwhile, HP acquired remote computing software provider Teradici Corporation in July 2021, with the goal of strengthening personal systems capabilities through new compute models and services tailored for hybrid work.

Canada-based Teradici lays claim to the PC-over-IP (PCoIP) remote display protocol, designed to deliver desktops and workstations from a data centre or public cloud to end-users, with high levels of security, responsiveness and fidelity.

Within the context of HP and its partner ecosystem, Teradici brings a complementary set of capabilities focused on cloud PCs and virtual workstations.

In addition, combining Teradici’s offering with HP’s existing remote access solutions is expected to enable the vendor to offer a broader remote compute platform that spans on-premises and cloud solutions from any type of device.

Closer to home in Asia, Tian Chong highlighted that a key priority was to complete the acquisition of Poly by the end of the 2022 calendar year and “enhance their line-up of products that can help [consumers] collaborate better” be it “working in small groups, in the office or at home”.

Given such rising demand for hybrid work equipment, Tian Chong also noted a strategic move in the audio video channel, an area he acknowledged “is a part of the channel that HP has not worked with before”.

“They are specialists in this type of gear and are not your typical IT reseller,” he explained. “They have a different level of expertise, so we have to incorporate them into our partner program”.

With an evolving industry, Tan also indicated the opportunities for partners to “cross pollinate to learn a different skill set” and for HP to become a “melting place” where partners can grow their portfolio and maximise cross-sell opportunities.

3D printing as a new frontier

Another key arena for HP and its partners to leverage is 3D printing, specifically in the mass manufacturing space.

“3D printing is definitely not in the infancy stage,” Tian Chong confirmed. “It’s not completely mainstream yet but it’s fast approaching that because, in the prototyping area, it’s now widely used.”

But when assessing sector opportunities, the industry executive added that the prototyping field is a “crowded market”, hence an increased interest in mass manufacturing.

“That space is more special because we have to work with print service providers who have software solutions to go after specific requirements,” he explained. “The big brands prefer to work with established companies that have a global presence with a big service support network.”

For example, HP worked with Japanese car manufacturing giant Nissan to solve an issue linked to stocking car parts of older, less popular models and reducing waste. The vendor assisted in digitising such parts to print them when required.

The technology is applicable for HP’s internal use as well. Tian Chong shared that inside the vendor’s smart manufacturing facility which produces HP printheads, 3D printing is used “not just to print the finished goods but also for parts that go into a machine” used in the production line.

“We have now managed to replace a certain percentage of these machine parts, which used to be metal which was expensive and wore out after a certain lifecycle, plus we’d have to order it from vendors meaning we had downtime to replace it,” Tian Chong highlighted.

The benefits of self-producing include replacing parts for “a fraction of the cost” while creating “more robust” machinery with a “more efficient” design by making them “lighter, easier to handle and more green”.

Arguing the case for smart factories, Tian Chong also alluded to the new levels of value that 3D printing provides, especially at a time when the world is confronted by ongoing supply chain issues such as logistics, port lockdowns and congestions, in addition to COVID-19 and geopolitics factors.

In the manufacturing, logistics and transport industries, smart factories can also potentially solve issues such as labour shortages during a pandemic and reduce the need for extensive storage spaces for huge volumes of cargo.

“A lot of industries will have to rethink their whole business model,” Tian Chong remarked. “When you have smart factories everywhere, a lot of that volume will go away and have to be replaced by other businesses.”

Collaboration is key

In responding to shifts in the market, alongside changing consumer behaviour patterns and a new path forward for HP as a consistent channel-centric vendor, collaboration in the partner ecosystem will be key to future success.

The launch of Amplify as the vendor’s enhanced partner program in mid-2020 is facilitating such collaboration, reflecting the evolving requirements of partners and ways in which HP can strengthen ties more efficiently.

In leading ecosystem growth aspirations, Tan stressed that collaboration represents a “key pillar” of the program and will be the “turning point” in how HP is going to work with partners in the months and years ahead.

“Data is the new currency,” Tan claimed. “But I do not think there are a lot of companies out there that are smart enough to use that data to unlock new capabilities.

“So, what we tell our partners is this: share with us the data about who you sell to and what industry you sell to, and we in turn will share with you our own data, and also, industry and market data.”

As revealed by Channel Asia, HP is placing data at the heart of channel growth plans through an intelligence platform designed to convert partner information into strategic customer insights, leveraging more than one billion data points provided by the ecosystem on a weekly basis.

Under the banner of Amplify Data Insights, the offering is designed to combine third-party intelligence and partner data into one “intuitive dashboard”, allowing technology providers to benchmark performance, enhance customer experience levels and strengthen long-term strategic priorities.

Available via the vendor’s partner portal, the platform complements the launch of Amplify with 98 per cent of eligible partners opting-in to report data. Collectively this amounts to more than one billion data points being uploaded to the platform on a weekly basis by the ecosystem.

In combining protected partner data with third-party market intelligence and internal information generated by HP, the platform focus on three core segments -- Descriptive Insights, Predictive Insights and Prescriptive Insights.

Descriptive Insights help partners benchmark performance relative to country or market, referencing sales growth, product performance and inventory levels.

Key areas of focus include revenue and unit sales, rankings and ratios to hardware by market and company size, in addition to assessing inventory levels by HP product group, category and product lines, alongside sales mix by customer industry as well as compensation and rebate history.

Meanwhile, Predictive Insights is designed to “anticipate customer interest and purchase decisions” based on HP proprietary algorithms spanning end-user refresh cycle data, warranty expiration heat-maps and product lifecycle intelligence.

“We can even provide a recommended list of HP products to pitch and how to sell,” Tan added.

In relation to data privacy concerns, Tian Chong clarified that HP has to “make sure that we reassure partners that there are rules of engagement with the data and that we understand data privacy laws”.

“With the telemetry data that we are getting, combined with a lot of other insights that we have globally, and then of course, the partners have lots of data on their customers -- if you put that together, the idea is that we can do more targeted demand generation and campaigns to identify proactively what may happen going forward,” he noted.

Strengthening sustainability plans

In addition to revenue and profit growth opportunities for the channel, HP’s commitment to sustainability is also picking up pace following the launch of Amplify Impact in early 2021.

The initiative focuses on providing Amplify partners with ways to benefit from improving sustainability practices, offering training, sales and marketing resources, as well as a return and recycling program for end-of-life HP products.

In February 2022, the program was expanded to an additional 24 countries, including Indonesia and Malaysia, making the initiative available to a total of 43 nations worldwide.

Since its initial launch in early 2021, the program has trained and educated more than 1,400 partners to help them drive change while maximising opportunities with sustainability as a key competitive differentiator in their respective markets.

HP has set itself the goal of enrolling at least 50 per cent of its HP Amplify partners in the voluntary program by 2025.

“In FY21, we tracked US$3.5 billion of deals linked to sustainability,” Tian Chong disclosed. “A year before that, we were looking at about $1.5 billion of business linked to sustainability. This is growing, the curve is really steep and it’s climbing.”

The profitability of sustainability can be attributed to a variety of reasons, notably that “the younger generation is also demanding it because they want to work for a purpose-led company, and they want to sell a purpose-led brand”.

“We can do good and grow at the same time,” Tian Chong stated. “That's the message. But at the same time, it’s also good for talent because you want to attract and retain talent.”

In general, Tian Chong noted that climate change issues are receiving more attention and in certain countries and industries, customers are “demanding it in the RFPs”, hence forming a business case for green investments.

However, both Tian Chong and Tan recognised the need for partner enablement through education and training in this venture.

“As the industry pivots, there are many things that the partners will also try to gamble with,” Tan added. “But you have got to start somewhere and that is why I think with Amplify, the fundamental difference is you really have to get partners to take the first step.”