Giant targets small firms to win the PC vote
Sunday 22 December 1996
Computer makers are already actively concentrating on the increasing numbers of small enterprises, of course.
But Hewlett-Packard believes they are missing out on potential sales by not making it easy for people who are generally short of time and often technophobic.
Its answer, just being launched in Britain, is to run a chain of dealerships aimed specifically at this sector (though prepared to deal with individuals looking to work from home, too). The idea is that they will offer "solutions" rather than sell pieces of equipment and then leave it to customers to work out how to put them together.
However, in an attempt to convince the market that the centres will represent their customers effectively when dealing with HP, the company has set up the operation as a separate concern, called Netfire.
Although run by John Mostyn, a former HP manager, it is at arm's length from the US manufacturer and will operate the office centres under a franchise. This is the first time that the company has gone into franchising and John Golding, chairman and managing director of HP's UK operation, acknowledges that this poses a potential risk for one of the world's most highly regarded brands. But he says: "It has got to be a huge competitive edge to approach the whole market. We have every interest in the world to want to make this work."
Aware that he will be under the gaze of people throughout the HP empire, which last year achieved revenues of $36bn (pounds 22bn) , Mr Mostyn argues that the initiative he has been put in charge of could set the scene for future developments. As a producer of about a quarter of a million products in computing and other areas of electronics, HP is organised vertically - and for this venture to succeed it needs to be able to work across those divisions in order to service end users, or customers.
Both Mr Mostyn and Mr Golding stress that the company is putting enough resources behind it to make the venture successful. But they are not trying to push the pace too much.
The project was actually started last year, with research into reactions to the idea. The positive response that came back was largely based on the strength of the brand and the fact that the huge product range made franchising a suitable approach.
Even so, the operation now being rolled out around the country, with the aim of setting up 350 franchises in the first year, is moving cautiously. The first year is being treated as a development year, with total start- up costs to the franchisee amounting to about pounds 8,000, largely made up of a pounds 5,000 fee and the cost of buying a demonstration model and promotional unit.
It is envisaged that typical franchisees will already be in the computer dealership market, with turnover of between pounds 1m and pounds 3m. Initially, they are likely to devote only a part of their premises to the HP Office Centre, though it is hoped that many will become dedicated to the initiative. And the rewards? "You have to sell one office solution a week to cover your costs," says Mr Mostyn. "If you sell five to six you will be very successful."
He sees customer service as being a key factor. Research undertaken on behalf of the company shows that technical support, unit cost and manufacturer's reputation are the most important influences on choice of IT equipment, and HP is already renowned for the strength of its help desk.
But in an attempt to strengthen that image and build a significant bridgehead, Mr Mostyn says he and his team will be going further. Dedicated account managers within HP will be ensuring that the centres get the products they need when they need them, while Netfire will be making great efforts to escape from the confines of the specialist IT market and "go to the consumer".
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