As HP evolves from a technology company into two Fortune 500 companies, Irv Rothman, president and CEO of HP Financial Services, takes a look at the unique ability of a captive financing provider to help accelerate business transformation.
A lone driver is navigating an unfamiliar road full of hairpin turns and rough terrain. It’s impossible to see what’s coming around the next bend. Then the rain starts. In the face of uncertainty, the driver is calm, cool, collected and utterly confident. How?
Though your customers may not be cruising unfamiliar streets in challenging conditions, it’s plain to see we’re in an era of technology disruption, which can leave them feeling like that lone driver. Business leaders are feeling more and more pressure to figure out how to innovate technology quickly. But disruption is the spark that ignites transformation — it doesn’t sustain it. You need to help them build the strength to endure — with a strategy to sustain transformation over the long term.
What is the secret to confidence in the driver’s seat? The symphony of engineering that is both under the hood and catching the eye. Every component of that vehicle from end-to-end — the suspension, transmission, engine and even the tires — give you the flexibility and agility to hit the road and hug those unexpected curves. Behind the wheel you can’t always see these components working together, but that harmony is loud and clear. Most importantly, it puts your customers in control of the speed and agility they need to realize desirable business outcomes.
For HP Financial Services, it’s about more than being able to put the pedal to the metal. It’s about having the endurance to sustain long-term transformation. A captive possesses the genuine expertise to manage IT assets and to deliver the customer and partner experience that maintains long-term relationships. As HP goes through the biggest change in its history, HP Financial Services is ready to drive that transformation as part of Hewlett Packard Enterprise and a partner to HP Inc.
IT Consumption – TCU vs. TCO
The traditional IT investment model was built around ownership or leasing. For the average company, this method amounted to making sure total cost of ownership was one of your Key Performance Indicators (KPIs), and you were off to the races. Cash was king for many companies, and the costs associated with maintaining owned or leased IT assets were not necessarily impacting the ability to meet business demands of the time.
However, going back to that notion of disruptive IT change, our customers today are moving away from this old style of thinking. They demand more agility and flexibility in the pursuit of business transformation and business model innovation. Those companies that haven’t changed their mindset and behavior have paid the consequence of having less control and foresight into their IT investments. History is filled with examples of high-flying companies that failed to adapt and then drifted into irrelevance or went out of business entirely. To further illustrate, consider the plight of the taxi/limo business today.
The cost of maintaining existing legacy technology while actively transitioning to new technology can often require more IT budget flexibility than a company has. Think IT “double bubble.” The ability to consume IT capacity based on fluctuating usage demands is the new norm. So that old reliable KPI of TCO needs to get tossed out the door in favor of “total cost of usage” (TCU). This approach requires a much more flexible IT acquisition method — and options to customize based on business needs. This is akin to comparing your trusty, but gas-guzzling, pickup truck to a hybrid vehicle. Both can take you from point A to B, but where one may come to a grinding halt without gasoline, the other can keep chugging away when the gas tank is empty by consuming electricity.
It may sound like a bold statement, but I will stand by it: Nothing is going to disrupt the IT industry more than the concept of IT consumption models. The Economist Intelligence Unit found that almost 80% of companies say their customers are changing how they access goods and services. More than 51% of these companies are changing their pricing and delivery models.1 This data point beautifully illustrates disruption at work. Companies are in need of a sea change as to how they access and consume technology. In fact, we found the same challenge facing our partners. A recent partner focus group we conducted revealed that more than 50% of partners’ top priority is to help customers adapt to new technology solutions yet more than 70% are not changing the mix of solutions they offer, at least not up to this point.2
Earlier, I compared the inability to predict the impact of IT innovation to driving around a blind curve. The McKinsey data and HPFS independent marketing research prove this — that despite IT and Finance stating they know exactly what they are getting from their IT investments3, they typically run 45% over budget, 7% over time, delivering 56% less value than predicted.4 Organizations need flexibility to transform their businesses in a manner that will ultimately accelerate growth. The ability to think strategically through how the business should adapt from current IT investment models — whether it’s ownership, financing or a combination of both — is key. But before business leaders make any decisions, it’s important that they understand the underlying drivers creating the need for new IT consumption models. Rather than thinking through the end of an IT project or budget cycle, customers need to push themselves to measure success strategically, based on long-term business results. Now imagine if we had just kept talking about TCO?
Future of HPFS
Times are changing at warp speed these days. I would be remiss if I didn’t say that HP Financial Services isn’t feeling the same pressures. As the HP separation — scheduled for November 1 — approaches, this is an immense time of change. But keep in mind that old saying, “The more things change, the more they stay the same.”
As HP begins its history-making evolution from the largest technology company to two Fortune 500 companies, you’re probably wondering why I’d say such a thing. This is arguably the biggest change a company with a 76-year legacy, globally recognized brand and direct linkage to the birth of Silicon Valley could experience.
The reason I make this bold statement is simple — HP Financial Services. As we march on towards “day one” for both Hewlett Packard Enterprise and HP Inc., what has become undeniably clear is the unique ability of a captive financing provider to help accelerate business transformation. We are the secret weapon under the hood — helping to quickly accelerate response to technology disruption now, and shifting gears to endure long term business transformation. As my fellow captives know, this is no easy feat.
Allow me to explain and offer a critical piece of advice for charting a course for your business into new territory. In the absence of predictability, your customers need flexibility. You need to elevate your role and help your customers and partners take first steps towards business model transformation by leveraging new IT consumption models. And it’s about balance — tempering your ability to push innovation into new territory with the ability to perfect what works.
The “innovation” is the ability to leverage new IT consumption models to drive business model transformation. This approach can help you anticipate and respond to business change on a continuous basis. What is the ‘constant’? For HP Financial Services, the sweet spot is that we know IT assets and how to manage them. Deep knowledge of HPE’s and HPI’s technology, how to help customers plan and procure, track and manage and maintain ongoing technology refresh to drive continuous business innovation. This is why we will remain the preferred provider/partner for both HPE and HPI throughout separation and beyond, and what will hopefully help you drive your customers around that next bend too.
1 Economist Intelligence Unit. Supply on demand: Adapting to change in consumption and delivery model. 2013
2 Focus groups conducted on behalf of HP Financial Services. IT investment trends in the commercial market. March 2015
3 Focus groups conducted on behalf of HP Financial Services. ITAM KPIs and Company Outcomes. May 2013
4 McKinsey. Delivering large-scale IT projects on time, on budget and on value. Michael Bloch, Sven Blumberg, Jurgen Laartz. 2012
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