The document discusses Hewlett Packard's Computer Systems Organisation and its approach to selling to enterprise customers. It finds that HP is strongest in downstream repurchase opportunities but needs to improve in midstream replacement/expansion and upstream innovation opportunities. It recommends that HP adopt a portfolio management approach where it enters accounts at multiple levels tailored to the dynamics of different sales opportunities, rather than its current approach of starting downstream and moving up. This represents a change from treating salespeople as a cost center to developing long-term consultative relationships with enterprise customers.

1. Hewlett Packard – Computer Systems Organisation:
selling to enterprise customers

2. Situation analysis
 HP’s CSO are market leader in computer’s production
 Price/performance factor is a USP
 Early success in the 1980s was followed by a decline in industry business
 HP responded by redefining competitive strategy and revamping its
product lines
 Adoption of common RISC architecture, aimed at easing (low-
reputed)marketing department’s job
 Buying patterns shift to increasingly including OEMs, VARs and
distributors
 Consequence: lowered HP’s average prices and increase in cost of
sales
 Decision to focus on top forty to fifty customers
 UNIX workstation’s demand growing 40% per year
 application of Pareto 20/80 rule
 20% of CSO customers account for 80% sales

3. HP’s CSO customers
ENTERPRISE SMALL/MEDIUM INDIVIDUAL
(large) SIZE
TURNOVER $0.5 - $200m each Below $0.25m each Not defined
Daily orders Monthly/quarterly
(2500 firms) orders
% OF Top 5% of customers Not defined Not defined
accounted for 40% of
TURNOVER HP’s total sales
CHANNEL Direct sales by HP Combination of sales Exclusive sales by
sales representatives reps and channel indirect retail
USED partners channels

4. Issue at hand
Identify market and
organisational Redefinition of industry
opportunities to grow and focused approach to
reduce operational costs selling to large/enterprise
(i.e. Sales, support) from customers
30% to 10%
 solving the issue could yield another structural change
in the sales organisation department (first change:1992)
 Robert Dudley from Leap Consulting commissioned to
audit HP’s enterprise customer management approach

5. Planning the next step:
the sales process audit
 Goals:
 illustrate how current HP sales actions aligned with
buyer requirements
 Suggest ways to optimise current approach to
enhance return on productive selling time
Two cells sampled for the audit:
1) Largest HP Customer (see next slide)
2) Industry in which HP was strong
 Commissioned LEAP Consulting’s Robert Dudley

6. Planning the next step:
typology of sales opportunity
TYPE Repurchase Replacement Expansion Innovation
• customer initiated •HP initiated
• not influenced by
• influenced by IT IT
DESCRIPTION • budget to be
•Assigned budget created
• 5 stages
•4 stages
•The three would generate 80% of the sales to the •Generate 20% of
large customer (5 sales reps) sales from lead (1
•Project average length: 6 months =>4-stage process sales rep)
PROJECT • 53 hours per week or 2400 hours per year (per sales •Length: 1year (for
SPECS rep) 4 stages) + 1or2
•Turnover: $60m sales + $59m hardware + $1m years for last stage
consulting = $120m total sales •Turnover: $22m
 similar results are achieved with industry sample

7. The next steps
 Regrouping:
 repurchase opportunities as downstream
 replacement/expansion opportunities as mid-stream
 innovation opportunities as upstream
 Next step, migration strategy: up to IT infrastructure
and enterprise-wide solutions (HP is doing well
downstream and mid-stream)
TYPE Downstream Mid-stream Upstream
CRITICAL • improving • selection of • sell concepts and
operational accounts, i.e. not instil delivery
SUCCESS efficiency pursuing each ability to
FACTORS opportunity customers

8. Current migration strategy
Penetrate other constituencies
to sell upstream solutions
Move up and get into
midstream business
Entering an account at the
downstream business
• Alternate model: portfolio management
 Entering an account at multiple levels
 Tailored to the dynamics of different sales opportunities

9. Questions
1) Is this the time for HP’s CSO to institute more changes? What
are your recommendations to Diaz?
• It’s about time for HP’s CSO to institute some changes to the
current architecture:
 Avoidance of numerous time drains due to sales rep “running in a
treadmill” to do everything for their accounts, e.g. Developing
quotes, configuring systems
 Need to prioritise the accounts and institute a support team
specialised on understanding the accounts’ needs further
reducing wasted time
 The latter point will reflect a better conversion rate in sales
opportunities, focusing not solely on repurchase opportunities
 In general give more specifications as to which procedures to
follow in deciding to serve an account and at which conditions

10. Questions
2) How is selling instruments (HP’s traditional business)
different from selling computer systems? Why does HP
treat its sales force as a cost centre? What are the
implications of such a structure?
 it differs in that HP “evolved from a manufacturer of ‘hot
boxes’ into a global supplier of information appliances and
solutions”
 HP treats its sales force as a cost centre because they are
focused on additional profits, thus making the salesforce
strive to close as many orders as possible, not being able to
add value to any business
 also due to the transactional nature of the businesses HP
serves; no customer seems interested in partnering up in the
long term with HP so that to mutually benefit and add value
 Emphasised by the (almost) lack of innovative projects

11. Questions
3) What is HP’s CSO approach to building relationships with
enterprise customers? What are its strengths and weaknesses?
 HP serves this segment directly
 HP sales rep invested time and effort from an early stage in
learning their customers’ businesses both identifying problems
and solutions to save money and increase efficiency
 salespeople transformed in consultants
 Strengths: develop long-term relationship with customers,
adding value to both businesses through customisation of
offerings
 Weaknesses: need for optimisation in providing such kind of
customised “consultant” service. In fact sales people are used by
the customers to solve any problem they may have. Also, there is
a need to prioritise accounts: skip that and you’ll lose business

12. Questions
4) Do you agree with the findings of the two audits as well as the
consultant’s recommendations? How is the new approach
different from HP’s CSO current approach to managing enterprise
customers?
 The recommendations by the consultant are consistent with the
critical success factors of the three new categories (down,mid and
up stream) and with the findings
 However HP needs to resolve its internal and external issues (e.g.
being positioned only as a hardware supplier) before moving on
to a portfolio management strategy
 That means focusing on training more salespeople in forging
relationships with large enterprises; it also involves prioritisation
procedure for mid-stream and up-stream opportunities
 Currently, HP salespeople are not prepared for such a switch (HP is
not well known for its marketing savvy)
 In the new approach HP would enter an account at multiple levels
instead of entering it at the downstream level and then trying to
tackle the rest of the organisation’s needs