Merger Behind, HP Moves To Reassure Customers

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Buoyed by the quick release of a product roadmap, most users appear to be giving the new Hewlett-Packard Co. time to show them how the merger with Compaq Computer Corp. will affect their networks, their IT plans and their budgets.

Industry analysts say the majority of HP and Compaq users haven’t been quick to jump ship. But what happens in the next six to 12 months will largely depend on whether HP continues to keep corporate users well informed, if they can avoid brand confusion, and if they make product migrations as simple and inexpensive as possible.

Early last month, the courts gave HP the go-ahead to merge with Compaq, resulting in the largest high-tech merger in history. The move left both Compaq’s and HP’s corporate users to make some big decisions, and possibly even some bigger expenditures.

“They’ve reassured us,” says Russ Schadd, a network specialist at Wallace Computer Services, Inc., a Lisle, Ill.-based print management company running almost 200 Compaq servers and 3,000 Compaq desktops. “The reps have gone out of their way to keep us up-to-date. We’ve basically been inundated with information from them…that business as usual will continue.

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“We have no thoughts right now of changing vendors,” adds Schadd, who notes that the new HP has not dropped any of the product lines that Wallace Computer is using. “HP has a real good service organization so we may even see better service because of this.”

Schadd isn’t alone in his continued loyalty.

A survey of nearly 1,000 users by Encompass, a Chicago-based Compaq user group that now is billed as an HP user group, shows that 35.8% said they would not choose an alternative vendor because of the merger. However, 9.9% said they already have gone with another vendor, and 34.8% said they are waiting to see what direction the new company takes.

The Encompass survey also showed that 43.6% said the merger announcement had not affected their work plans, while 25% said they suspended plans until the situation settled down.

HP was right on target in quickly releasing a product roadmap, or listing of what products from the former competitors were being combined, dropped or maintained, according to numbers in the study. A little more than 23% of those surveyed said they needed to see the product roadmap within one month of the merger and another 24.4% said they needed it within three months.

Customers ‘Know Where They Stand’

“When these things happen, what you often end up with is paralysis,” says Gordon Haff, an analyst at Illuminata Inc., a research firm based in Nashua, N.H. “By and large, they really moved rather decisively to lay out quite a detailed roadmap for what products are staying and which are going. …Customers may not all be happy about it but now they know where they stand.”

Haff adds that HP had a lot of hard decisions to make to avoid having double product lines, and so far the decisions largely have been rational and understandable.

“You have some customers who are affected by particular decisions and of course they’re less happy,” says Haff. “It’s a little surprising but I don’t see anything that strikes me as an atrocious decision…They get a pretty good grade in the early going.”

Keeping that flow of information moving out to their customers will be HP’s biggest challenge, according to Rob Enderle, a research fellow at analyst firm Giga Information Group.

“They need to redefine themselves and they need to do it very quickly,” says Enderle. “They initially announced the death of the Compaq brand and then brought it back and now there’s a mishmash of plans. The confusion could push customers over to competing brands, like Sony or Dell.”

And Dan Kusnetzky, vice president of system software research at Framingham, Mass.-based IDC, says HP simply has no time to waste when it comes to taking care of their major customers.

“What’s clear is that nearly everyone will have to do something to adjust to this,” says Kusnetzky. “The OpenVMS people are being forced to move, for instance. Now they have a few years to do it, but a prudent CIO would be starting the planning process now. And Tru64 people have a couple of years to work on the [migration] process, but it’s not at all clear if either of those groups will choose an HP platform.”

IBM and Sun Microsystems are both waiting in the wings to pick up any customers who are unhappy with HP’s new roadmap or who figure if they have to migrate to a new product they might as well try out a new vendor.

“If a customer is facing a move and re-architecting some of his solutions, there’s definitely a space for IBM and Sun to say, ‘We know you’re going to go through some pain so why don’t you come to our environment?'” says Kusnetzky. “No company can make a major shift in platform immediately…And while the clock is ticking, IBM and Sun will be knocking on customers’ doors.”