No jack of all trades

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					Business Connexion

The new HP way
AFTER the Compaq deal in 2001 HP under CEO Cariy Fiorina adopted a more generalist approach to if clients in the quest for synergy between the two groups She created an inte

No jack of all trades
Business Connexion and HP have a strategy in common
WHAT do glo bal giant HP
and JSE list ed Business Connexion

specialists who can speak to clients needs and can then put virtual teams together to develop appropriate solutions The group has had a matrix structure in place since
1997 which enables Business Connexion to

grated sales force that sold packages of HP products to its corporate customers According to a May 2005 Buunus MM article one rea son the strategy fell short was that it pitted HP s generalist sales force against the razor focused salespeople from the likes of Dell printer specialist Lexmark International Inc and storage giant EMC Corp
Kurd s renewed focus on focus rather than

have in common beyond a business relationship in
South Africa

use its technologies more cost effectively and tap into knowledge across departmental
boundaries But although he believes the group is now most of the way there Watt points out that this process is evolutionary as the number of offerings remains broad and the situation is exacerbated by the fact that many products have different applica
tions in different industries

Peter Watt

CEO of

synergy will see HP shed about 10 of its workforce or 14 500 jobs globally which win cut costs by an estimated SIJbn a year This

Business Connexion says that although Business
Connexion differs from

includes 5 900 job cuts in Europe the Middle
East and Africa EMEA

HP in being solutions rather than product fo
cused there are some strik

Both Business Connexion and HP have

Last month HP posted quarterly results that beat Wall Street forecasts In addition Ms prof it forecast for the current quarter was akeed of analyst projections
But unlike HP Business Connexion has

ing similarities between the business strategy adopt ed by the South African com pany in September 2004 and HP s regeneration strategy adopted by new CEO Mark Hurd see box In many ways this change reflects global mar
ket conditions

focused on five key elements streamlining operations boosting the knowledge base supporting increased focus on specialist skills improving price competitiveness and reducing internal obstacles Happily Watt says that Business Con nexion has made good progress in all five
areas

already reaped some fruit and analysts are confident that there is more good news to come from the group
Hurd took over Investors were getting the nonprinter divisions including PCs server and storage computers IT services and soft
ware for free But the truth is that Business

In a nutshell the strategy of
both is to become more focused

than generalist Watt argues that more IT com panies will move to this thinking He says that in tough times as the last five years have been for the sector globally IT com panies tend to go for a gener alist approach The driving

He believes that the group is about 60 of where it wants to be in streamlining its operations The group is in the process of installing SAP ERP so that it will have a common platform across all its businesses The streamlining process can be completed once the SAP implementation is complete But there is one structural issue looming
Watt believes that IT salaries are set to

Connexion itself is in a far stronger position than HP so it won t enjoy collecting the same low hanging fruit However Siza Rafuza Metropolitan Asset Management s IT and Electronics analyst believes there are three key areas where Business Connex ion should benefit Government IT spend ing a recovery in its performance in the rest
of Africa and the nascent Voice over Inter

increase as the industry simply does not

Pet r Watt inott

I of the wiy there

force is that companies such

35 Business Connexion have

to offer IT solutions and not just product solutions The temptation is to employ generalists but the problem then is that they are not good enough on the detail They will stir an opportunity in the client s mind who will then go to market and find providers of focused solutions The generalist company then discovers that its people do not have enough specific knowledge and have to spe
cialise

have sufficient skills to meet the demand that he forecasts

net Protocol VoIP market
Rafuza comments that other IT sector

Shareholders will be asking how much the strategy will add to Business Connex
ion

According to Watt Business Connexion believes that it needs both generalists and

Analysts believe that HP stands to gain According to a May 2005 article in Business Week the HP share price only factored in the value of its printer business at the time

players have said that Government s IT spending performance has improved which is good news given that the market expects it to spend R8bn R14bn on IT products and
services in the medium term Rafuza

believes that Business Connexion given its

black economic empowerment

BEK

credentials should

get an increased pro
which

Big Thing Watt believes that business could
grow to at least Ribn in revenues over the

portion of Government business

will increase turnover significantly Watt believes that Government IT spend is now a matter of when not if But its VoIP through the group s recent acquisition of Bidnet still awaiting Competition Commis sion approval could be the group s Next

next three to four years pushed by both market growth and the likely improvement
in technologies The one thing that won t change is Busi ness Connexion s focus on annuity revenue from its outsourcing contracts Watt says

this has now grown to 76 and he plans to maintain a 75 25 split between out sourcing and revenue from products tech nology infrastructure and business applica
tions
KIRSTY IASCHINGER

ldaschinger@mweb co za


				
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