HP nose-diving into SMB market
By Li Weitao (China Business Weeky)
Updated: 2004-10-28 10:07

Hewlett-Packard, a major force in the global information technology (IT) market, is plunging head-on into the SMB (small and medium-sized business) market.

The firm last week unveiled its latest strategy to win over SMBs in Asia-Pacific, in the hopes of riding the wave of increasing technology spending by smaller operations.

The strategy, built on the HP's "Smart Office" framework, is largely a packaging and expanded portfolio of technology products and services that include security, mobility and enhanced-communication solutions.

By bundling hardware, software and services, HP hopes to help SMBs, which usually are cash-strapped, to decrease the complexity of technologies and cut costs.

China, where 99 per cent of companies are SMBs, will be one of the top priorities in the initiative, said Dennis Mark, vice-president and general manager in charge of commercial accounts and SMBs, in Asia-Pacific and Japan, at HP's Customer Solutions Group.

SMBs contribute nearly 50 per cent to China's GDP (gross domestic product), 60 per cent to the country's exports and create about 70 per cent of employment.

HP is investing US$100 million to market the new SMB strategy, Mark said. Most of that money, he added, will be spent in China.

"China is a key country in our marketing campaign," he said.

The initiative comes at a time when Chinese SMBs are ramping up their IT investments, which bodes well for technology vendors such as HP.

Deepinder Sahni, an analyst with research firm AMI Partners, predicts IT spending by SMBs in Asia-Pacific will grow 17.7 per cent this year, and 18.3 per cent next year.

"IT spending by SMBs in China and India will grow fairly rapidly," Sahni said.

The analyst predicts Chinese SMBs' IT investments this year will reach US$17.05 billion, up 33 per cent year-on-year.

Next year, the figure will hit US$22.04 billion, up 31 per cent.

HP's "smart office" initiative is aimed at helping local SMBs tackle the increasing challenges posed by global players, which are stepping up penetration into the local market, said CHIA Wee Boon, senior vice-president of HP's Customer Solutions Group in Asia-Pacific and Japan.

"Local SMBs need to respond by understanding and adapting to the new rules of the game in a globally competitive environment," he said.

"Those that do, will differentiate themselves and survive."

China's accession to the World Trade Organization in December 2001 unleashed intensifying competition between local firms and global players.

With the further opening of the domestic market, Chinese firms will face a tough time in coping with and surviving the foreign competition.

Technology is a major tool SMBs can use to transform themselves and boost their businesses, CHIA suggested.

HP is well positioned to serve the SMB market, as it has a complete technology portfolio, unlike its rivals, said Clarence CHO, director of HP's SMB marketing in Asia-Pacific and Japan.

"HP is the most active player in promoting the SMB strategy," he said.

HP generated more than US$21 billion in global sales from the SMB market last year. That accounted for more than one-third of its annual total revenues.

IBM also has its own SMB strategy -- bundling hardware, software and services -- to win customers in the highly competitive and rapidly growing SMB sector.

But, Jason Juang, general manager in charge of HP's solution partner organization in China, said HP has a unique advantage over IBM.

"IBM may be doing well in the big business market. But in terms of SMBs, it does not have a complete product lineup like HP," Juang said.

HP's PC shipments in Asia-Pacific and Japan in the year's second quarter reached 1.052 million units, indicate latest statistics released by data tracking firm IDC.

HP, which earlier this year decrowned China-based Lenovo, has been the region's top PC vendor for two consecutive quarters.

HP has said SMBs in the region will become its major customers in the PC business.

To better adapt to the Chinese market, HP will step up its efforts to develop solutions for SMBs in China's third- and fourth-tier cities, Mark said.

"We need to tailor solutions for SMBs in China, as their demands are quite diverse," he said.

HP is serving Chinese businesses through its more than 6,000 partners in the country.

To spur the SMB market, HP has teamed with Chinese banks to provide financing to Chinese SMBs, so the firms can buy technology offerings.

Previously, HP just offered financing to big businesses.

"I believe it will be a natural trend for Chinese SMBs to adopt technologies through financing," Mark said.

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