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11/30/2001
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Business Technology: HP + Compaq = ?

InformationWeek's Editor-in-Chief Bob Evans ponders the question of whether the HP-Compaq merger is a good thing for customers.

So, the HP-Compaq merger: Is this a good thing? I don't want to sound sacrilegious, but I don't mean for shareholders; rather, is it a good thing for customers? Will you be better off as a customer after the merger than you were before it?

That question's been rattling around in my head for a while now, and I'm not sure I get it. More innovation? That's what Hewlett-Packard and Compaq are promising; but is innovation what you want and need most right now? How about better pricing? HP and Compaq promise economies of scale and protection of investments; will that translate into better margins or lower prices? What about a broader range of services? Compaq's Web site says, "The two companies have complementary strengths in professional services and services targeted at key vertical industries. Compaq brings strong multivendor capabilities, and HP has substantial experience in outsourcing." OK, that might be promising. And what's the overarching objective? According to the site, "Our objective is to redefine the economics of enterprise computing by advancing open, market-unifying standards. We will take standard building blocks, extend them with software and solutions and bundle them with architecture and support services." Well, if you're into redefined economics-and, depending on the redefinition, a lot of people probably could be-that sounds promising as well.

But what I don't see or hear from customers is any sense of excitement about the combination-no enthusiasm, no sense that the merger will reduce customer pain or increase opportunities. This past week, I asked a dozen CIOs and other C-level executives, all from large companies in various industries-and none with any ax to grind with HP or Compaq-three questions: What's the positive impact for customers? What's the negative impact for customers? Will you buy more from the combined entity than you did from the individual companies added together?

"There's no positive impact that I can see," one executive says, "other than hopefully one less company clamoring for my time." One CIO says, "Right now, I don't see any benefits to me"; another says, "No benefit is obvious to me"; and a third says, "There's no real or even perceived benefit to a customer from the proposed merger."

On the other side, one CIO says, "It will keep alive a bona fide technology alternative to Dell in its core markets. ... It should allow the exceptional innovations of both houses to touch each other and generate the best of both R&D components in future products. ... The breadth of combined product solutions should rival anyone else in the market, including IBM." This same CIO also cites such potential risks as strong cultures that might not blend, or future price changes (increases?) due to the elimination of some competition. But to my mind, his most ominous warning by far was this: "Disruption of customer focus during merger machinations."

That thought was echoed by another CIO who describes potential negative effects on customers this way: "Enormous distraction during one to two years of business integration will detract from customer focus." Says another: "There's a lot less negative impact for customers than most people think. The only real downside, and it's not to be underrated, is that there will be sufficient confusion by the combined sales force that service will suffer in the short term."

Another CIO, who likes both companies and would like to see the merged company succeed, says it's "a matter of some potential positives vs. one huge-and I mean huge-challenge." On the plus side, he says, is an opportunity to avoid the slow slide into irrelevance by two companies that couldn't match Dell's pricing; together, he says, they might figure it out. But then there's that challenge: rationalizing, integrating, and standardizing customer-facing applications so all the far-flung groups and divisions of two massive companies speak with one voice. "It will be enormously difficult for them to get those things done without being terribly distracted and unfocused. If they don't execute brilliantly and ruthlessly on presenting a single, simple, consistent face to the customer, the competition will kill them."

The HP-Compaq merger-a good thing for customers?

BOB EVANS
Editor-in-Chief
bevans@cmp.com

To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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