HP wants desktop resellers to add higher-margin workstation business

Published: October 4th, 2010

Fort Collins, Colo.Hewlett Packard Co. (NYSE: HPQ) brought the international media to its workstation group headquarters here last week to demonstrate the extensive quality and performance testing that goes into each of its workstation desktops. The message? A workstation is more than the sum of its parts, and the channel needs to help its customers see that quality is worth paying a little extra for.

Every HP workstation design goes through extensive testing before it goes into production, and even afterwards. Individual components are tested for quality, and interoperability. If one isn’t up to spec, it’s rejected and another supplier is sourced. Environmental testing puts workstations through their paces in simulated dryness and humidity, and from extreme cold to extreme heat and everything in between. Boxes are bombarded with radio waves, and emissions are closely measured. Different configurations are tested to find the quietest possible. And to ensure you never pull a damaged workstation out of a shipping box, packed boxes are subjected to everything from three-foot drops to excessive shaking.

(Learn how the De Ferran Dragon Racing Team used HP workstation technology for an edge at the Toronto Indy.)

The message from HP is that, while the components inside a workstation may be sourced from suppliers such as Intel, AMD and Nvidia, constructing a quality workstation is more than just a system-building exercise. The design, and how they interact, can have a tremendous impact on quality and performance. HP feels their extensive R&D and testing gives them an advantage over their competitors, and they hope that quality and reliability will be something customers will value and perhaps be willing to pay a little more for.

HP has been gaining ground on its rivals in the workstation space. Jim Zafarana, vice-president and general manager of HP’s workstation group, said HP is neck and neck with Dell Corp. (NASDAQ: DELL) worldwide, each with about 43 per cent market share. HP lagged behind in the category even when it bought Compaq in 1997, and has since closed the gap.

Zafarana said HP has been growing at 1.5 to 2x the market since 2002.

“2010 has been a tremendous year of recovery in the economy. When the worldwide economy went down in 2009, it hurt the workstation market really hard because capital spending was down. But this year workstations are at the front of the recovery,” said Zafarana. “We’re growing business at 50 per cent, year over year, and in the last calendar quarter our unit growth was 33 per cent, versus 24 per cent for the rest of the market.”

The launch earlier this year of the z200 small form factor workstation in the entry-level category is also opening up new ground and expanding the reach of workstations, said Zafarana. He estimated the high-end, dual processing z800 and z600 systems are about 30 per cent of sales, while the z200 and z400 are about 70 per cent.

(Watch the video: CDN was in Hollywood, Calif. for the launch of HP’s z200 SFF.)

“Some customers who were buying mini-towers like the small form factor because it’s smaller. But there’s also a substantial desktop buy where, instead of a PC, they’re moving up for the performance and reliability of a workstation,” said Zafarana. “So it’s not cannibalizing us. It’s lifting us.”

In Canada, Dell has a few points of market share on HP, but the vendor has a plan to try to close that gap going into 2011. Ira Weiss, workstation category business manager for HP Canada, said in Canada the top 10 desktop resellers are also the top 10 workstation resellers. Move down to the next 10, however and that same overlap isn’t there. His goal for the next year is to work with those next 10 desktop resellers to see if workstations could be good addition to their businesses.

“I want to talk to them to see how we could help them drive value and opportunity with HP workstations in their current customer bases,” said Weiss. “I have three sales specialists to help them sell workstations. We’ll do training, we’ll do education, we’ll do joint sales-calls, and we’ll ensure they’re enabled.”

Workstations offer partners more attractive margins than a traditional desktop, and Weiss said customers will value the workstation quality if partners help them understand the differentiators and the business case.

He added that a workstations sale is a little different from a desktop PC in that, with workstations, it’s often the applications that drive the sale. A video editing customer could need Adobe Premiere, or a design customer might need AutoCAD. Often the application will drive their choice of box and configuration much more so than with a desktop buy.

Since many hardware resellers don’t have extensive knowledge of these applications, Weiss said he sees an opportunity for application and hardware resellers to partner on their go-to-market, as a way for desktop resellers to grow their business without having to invest in training-up on the applications side.

Follow Jeff Jedras on Twitter: @JeffJedrasCDN.


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