HP puts $750 million behind small business strategy

WASHINGTON - Hewlett-Packard Co. plans to pump $750 million into a new "Smart Office" initiative to market its computers, printers and services to small and medium-sized businesses, the company said Thursday.

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Touting HP as the worldwide leader in the small and medium-sized business (SMB) market, HP Chairman and Chief Executive Officer Carly Fiorina said HP will invest the money in research and development, marketing, sales programs and services. The launch of the Smart Office initiative, aimed at providing the right expertise and the right technology with easy-to-own options, included an announcement of more than 100 new products and services aimed at the SMB market.

"Just as small and medium businesses are the lifeblood of our economy today, technology is the lifeblood of small and medium businesses, which is also so difficult and frustrating when that technology isn't all that it should be," Fiorina said during a conference call Tuesday. "They spend their days worrying about customers, contracts, employees and payrolls, and they don't need to be worrying about their technology."

Among the pieces of the Smart Office initiative:

-- HP Smart Finance offerings aimed at simplifying purchasing through HP and its vendor partners, trade-ins and recycling. HP will offer zero percent financing or no payments until 2004 for three months beginning Oct. 1.

-- HP ProLiant servers with pre-installed Microsoft Windows Small Business Server 2003, which supports 75 users out of the box.

-- New desktop systems, including a health-care PC, and a space-efficient package with a slim-line desktop PC and a flat-screen monitor.

-- A variety of new printers, including the HP Color LaserJet 9500, which HP touted as capable of creating professional do-it-yourself marketing materials.

-- HP Care Pack services, a set of warranty packages including application support and data backup and recovery.

-- An integrated support system that includes help from HP's vendor partners, resellers, online chat and Web-based seminars.

HP will package those products and support together in end-to-end products that make sense for SMBs, Fiorina said. She took a shot at competitors who offer direct sales of PCs to customers. "There are some companies that market their products as easy," she said. "The problem is their vision of easy begins with the shopping and ends with the purchase, but the owning leaves a lot to be desired."

HP will announce partnerships aimed at four small business vertical markets -- accounting, medical offices, legal offices, real estate and health-care, added John Brennan, HP's new senior vice president of SMBs.

The small and medium-sized business market for IT goods and services is about $460 billion a year worldwide and is expected to grow to more than $640 billion over the next three to four years, Brennan said. HP's chunk of that pie is $21 billion a year, the number one company in IT sales to SMBs, he said.

The new Smart Office focus should help HP expand that SMB marketshare, said Michael Haines, principal analyst with Gartner Inc. "It's a realization or a confirmation of the importance of the small and medium-sized business market in IT," Haines said of the HP announcement.

One criticism Haines had of the HP announcement is with the small number of small-business vertical markets it is targeting with packaged products and services. But considering how fragmented the SMB market is, the HP verticals strategy is a good start, Haines added.

Haines also praised HP for including its value-added resellers in its support and service plans for SMBs.

IBM Corp. has also tried to market to SMBs, Haines said. "We're seeing the major players now realizing what an enormous opportunity that market is," he said. "They also realize they'd better get their act together and get messages and solutions tailored to that market. That marketplace is tired of 'enterprise lite' being jammed down their throats, and IBM and HP obviously heard it."

But Crawford Del Prete, an analyst with IDC, said HP's Smart Office initiative could give HP even more of an edge over competitors like IBM.

"They need to take a leadership role in the segment," Del Prete wrote in an e-mail. "HP has a huge opportunity to gain ground in a segment that has largely been underpenetrated by competitors like IBM. I think HP's biggest challenge will be to make sure that they can drive the SMB initiative across all of its diverse products and services, while communicating with its channel."

HP needs this initiative that brings together the "right technology ecosystems for its products and solutions for resellers that focus on SMB," Del Prete added.