HP seems to be on track to achieve its initial worldwide A3 business goals, but progress in North America is progressing slower than expected.
HP’s ambitious goal for its A3 business is to achieve 12% market worldwide by the end of 2020. That’s not news since it’s a goal they’ve stated before, but during a webinar with analysts on April 17, HP announced that a year into the plan they are on track to achieve that goal.
The news was reported by David Laing, vice president and head of A3 and services future product marketing, who revealed that HP is ahead of plan in Europe and Asia, but behind plan in the Americas, particularly North America. Direct route to market where HP is calling on large enterprise and the public sector is also ahead of plan as is the mid-market space where HP engages with partners to sell to that market. In the SMB segment where HP works through its channel partners, HP has experienced mixed results depending on the region.
From a product category perspective, Laing reported that its Canon-based A3 products, which HP sells through transactional partners, is selling much better than expected even though sales are flat.
“We candidly expected that to decline faster than it has,” said Laing.
Similarly, HP’s single-function A3 business is also doing better than expected with HP’s IT partners who carry those products still enjoying success in the market with that product category. Laing also noted that the PageWide products are outperforming expectations, particularly in Europe, Asia, and Latin America while North America is not performing as well. Still, Laing said that overall sales of the PageWide products are of plan and that those products have been well received in the marketplace.
Another product segment behind the targeted plan are the Samsung-based engine LaserJets, a product HP is leading with in their dealer recruitment efforts.
Looking at route to market, at a global level, traditional HP partners who have been in the contractual space are performing ahead of plan.
“The value proposition is working very well for them and they are winning at a rate that’s higher than they and we expected,” said Laing.
As HP has been recruiting traditional net new partners from the traditional copier channel, Laing described the results as being mixed.
“We’ve had tremendous successes in each region, [but] partners are coming along more slowly than we would like,” acknowledged Laing.
To continue building momentum in the dealer channel, HP is focusing its plans in every region and is tracking partners through a five-stage channel activation plan and system. In those five stages, Laing emphasized that sales training on PageWide and HP security offerings are critical for helping a dealer’s sales people understand and communicate HP’s value proposition. The company is also activating those partners onto HP’s Smart Devices Services System in an effort to help them achieve 15-20% savings within their service organizations on HP’s A3 and A4 products. Dealers who are using HP’s Smart Device Services are reportedly experiencing savings in that range. Laing added that the company is working to activate all partners on SDS over the next six months.
Overall, HP is expected to expand its A3 channel with qualified Samsung, HP Select, and new partners to more than 1,000 in 2018.
An Expanded Product Portfolio
HP is also expanding its product portfolio, including optimizing the PageWide portfolio for SMB for the contractual channel, and expanding its LaserJet offerings for the China and Southeast Asia.
“We’re on track and excited about the progress we’re making,” said Laing. “No plan works exactly the way you want it and [there are] a few things we’re working on adjusting, but overall we’re excited about our progress.”
HP is offering two sets of products optimized for the contractual channel, including the Managed E776 Series, the Enterprise Color single-function 55-ppm printer and the Enterprise Color 55-ppm MFP. These products are targeted at enterprise and professional SMBs (healthcare, legal, people in SMB with professional IT requirements). This offering, according to Laing, has the best security—both on-premise and cloud—and offers high-duty scanners, large workflow capabilities along with robust processors and memory.
The second set of products, the Managed Series, includes a 60-ppm single function color printer and a 50/60 ppm color MFP. By “Managed,” HP means that those products have been optimized for the contractual channel and are sold only to contractual partners. Those products whether sold to SMB or enterprise have remote management and SDS functionality, enabling a contractual partner to manage those devices remotely and as part of a fleet.
For SMBs, HP announced Managed P Series PageWide single-function printers and MFPs that support SDS and include the full managed fleet of features from HP for remote management. Those are five pages per minute slower than the Managed E series products and the hardware is priced higher than HP’s typical Premier Partner pricing so that if a customer shops between the two, HP’s Premier dealers will be able to make 45% or more hardware margin on those products if they sell at the equivalent price the transactional customer would see those products on the web. The cost per page is also 20% higher with these products.
“These products are important for some of our channels but we have priced them so they won’t conflict and limit the margin potential of our contractual Premier Partners who are selling the managed family of devices,” said Laing.
The Managed P Series has a less robust scanner than the Managed E products, less memory, and a smaller hard drive, and it primarily supports cloud-based solutions as opposed to on premise or server-based solutions. Because of this, HP has been able to lower the pricing of the P Series relative to the Managed E product by about $300.
“For price sensitive SMB customers who don’t need those capabilities, it gives us a more competitive offering for our channel partners,” stated Laing
The Managed Color P Series also includes new features such as an output finisher and an input finisher which are available now, and an external finisher that will be available in July. Embedded job accounting has also been added to these devices so that users can do some simple user-based or account-code based job accounting and internal billing. There are also new copy features that gives a customer more flexibility in terms of job originals and support the broader set of output options as well as handicapped accessibility options, including a voice-control option.
We knew it wasn’t going to be easy for HP to make inroads into the North American dealer channel, and the latest update confirm our suspicions. We still think 12% worldwide market share in A3 is an ambitious goal even as HP reports they are on track, at least globally, in reaching that goal. While HP seems to be building a strong A3 product line for both enterprise and SMBs, old habits die hard in the North American dealer channel, and many dealers still seem to have a wait and see attitude and are going to take a little more time to come around to the HP value proposition if at all. It’s still early in HP’s initiative and their ambitious goals may have to be tempered somewhat to reflect the realities of the North American independent dealer channel.
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