Update: HP/Compaq customers grapple with product support

Concerns about ongoing product support are on the minds of many Hewlett-Packard (HP) customers in Australia as they await the results of an upcoming vote on the pending merger between HP and Compaq Computer.

With a vote on the HP/Compaq mega-merger expected to take place in the February-March timeframe, customers of both companies are sending signals that interruptions in product support is their primary concern.

At the same time, industry analysts have begun to caution both HP and Compaq customers that future product purchases from either company should be carefully considered, and a new survey of HP's vast user base of e3000 server customers warns that almost 20 per cent will opt for servers from IBM or Sun Microsystems when HP ends support for the e3000 in 2006.

The e3000 is a high-end, low volume line, only relevant to a handful of corporate IT units in Australia like Federal Government departments, according to Gartner. Gartner estimates the e3000 installed based in the Asia-Pacific is minuscule compared to North America.

Incentives aside, TMP Worldwide IT operations manager for Australia, George Curtis, said the recruitement firm had stopped considering any more Compaq purchases because it had "never been happy" with the quality of Compaq's product support or delivery.

A former Compaq customer which used its Prosignia and Proliant servers for more than three years, TMP's biggest contention with the vendor was a history of "unfulfilled promises" and service delays," Curtis said.

While he once considered Compaq a market leader in high-end servers, he said the vendor had developed a poor reputation in service over the years and offered less competitive pricing than suppliers like Dell or IBM, forcing TMP to switch to Dell's PowerEdge server range a year ago.

HP on the other hand has been in TMP's good books since the firm outfitted its 2000-person Australian arm with HP printers eight years ago.

TMP's Curtis said the HP brand was still strong in Australia and believes it will remain strong under a merger with Compaq.

However, he doubted the Compaq brand would have the same global presence if its name was re-badged under a merger, suggesting: "What could improve Compaq's poor image on things like product support and service is HP's more efficient internal processes and procedures."

Curtis' said his only fear as an HP customer now was that as a buyer of HP printers through Dell, a combined HP and Compaq could stop Dell from selling HP products because of a competitive clash, thus limiting TMP's choice in one-stop shops.

Governed by what he called "tougher economic times," Curtis said TMP may evaluate other printer-makers like Canon, Toshiba or Ricoh in order to cut by half the number of smaller HP workgroup printers it operates, and replace them with large multifunctional units combining printers and photocopiers. He said a smart move like this could save the company hundreds of thousands of dollars within a year, and reduce total cost ownership.

Curtis said HP's local sales and support teams' level of service had "not changed," nor had there been an interruptions to customer support since the proposed merger was announced in September last year. "Sales and technical support staff have no idea or information about the progress of the deal in Australia," he said.

HP customer Dan Barth, CIO of the Oklahoma Publishing Company in Oklahoma City, worries that HP will become distracted by the merger process if it goes forward. In Barth's opinion, if any detail of the merger causes HP to suddenly re-think the profitability of a particular product line, HP may very well send that product line to pasture, a possibility that creates great uncertainty.

"We've seen this with other companies, like IBM. If they are not hitting a strong following in a product line, you will see them move away from that product line," Barth explained. "The last thing you want to do is get on a technology that doesn't grow, doesn't evolve. The bottom line is [the merger] says to users 'Do you go to an EMC or a Hitachi and forget the HP solution?' You say to yourself, 'I'm going somewhere safe.'"A recent report from Gartner warns both HP and Compaq customers to limit their purchases of HP and Compaq equipment to "tactical purchases and upgrades" of products that have long-term strategic commitments from either HP or Compaq. The report lists HP printers, Compaq Proliant servers, HP/UX servers, mid-range Compaq StorageWorks storage, and high-end HP XP storage as products that have such a long-term commitment from the two companies.

Meanwhile, Gartner analysts share user's concerns that HP could be distracted by the merger and lose sight of many of its customers.

"Gartner remains concerned that senior management of both [HP and Compaq] will be seriously distracted by the need to persuade investors to vote for the deal, rather than engaging customers and improving strategy and execution," the report said.

However, even increased communication between HP and its customers regarding on-going product support may not be enough to keep worried HP customers from jumping onboard a competitor's platform. Less than 60 days ago, HP alerted its e3000 customers that the proprietary e3000 server platform would be phased out in 2003. Even with a migration strategy in place for e3000 customers to move to another HP platform, almost 20 per cent of nearly 1,000 e3000 customers said they were considering leaving HP for servers from IBM or Sun, according to a survey obtained by Computerworld sister publication InfoWorld from Interex, an HP enterprise users group.

The Interex survey also showed that 29 per cent of HP's e3000 customers were still undecided as to which server vendor they would go forward with, regardless of HP's migration options, trade-in incentives, and other ease-of-transition offerings.

Meanwhile, sources strategically positioned within HP's re-seller channel expressed shock at the responses to the Interex e3000 user survey.

"Our only concern is that we keep these customers buying HP products," said an HP channel partner who preferred not to be named.

The results of the Interex survey are similar to a survey of Compaq Alpha server customers taken last December by New York investment bank UBS Warburg.

When asked if a successful HP/Compaq merger would result in HP migrating Compaq's Alpha server customers to an HP platform such as HP-UX, Warburg's survey of Alpha customers showed that 90 percent said they would be dissatisfied and would look at other vendors outside of HP.

Not all HP and Compaq customers are hitting the panic button though.

Richard Glasberg, the director of data communications for the Commonwealth of Massachusetts, said he had "no concerns" about the pending HP/Compaq merger, and that HP "telling me they are having problems would be the only reason I would begin to worry."

However, Oklahoma Publishing's Barth believes the history of mergers such as the pending HP/Compaq deal speaks for itself.

"We saw what happened to Compaq with the DEC acquisition. I'm not sure [Compaq] has completely digested that yet. What will be the distraction for HP? Will they be taking their eye off the server ball?" Barth said.

Pointing to HP's purchase of Bluestone Software, analysts are also questioning whether HP is equipped to take on a merger the size of Compaq. Two sources close to HP, who requested anonymity, confirmed that Bob Bickel, one of the original Bluestone employees, has left HP.

"That's a bit of shock, and it's somewhat of a setback for HP," one source said. "A lot of people from Bluestone have left HP."

HP's acquisition of Bluestone has not gone as smoothly as HP might have hoped, and the Bluestone products and manpower seem to have been lost somewhat within the mammoth HP, sources said. Furthermore, the company has not done well at competing with application server vendors IBM, BEA, and iPlanet.

"The big danger with HP is that they'd take the Bluestone products and it would get lost within the larger suite of HP products, and that seems to be happening," the source said.

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