Anatomy of a Resurgence: IDC's Daoud on HP's Leap-frog Over Dell
By Scott M. Fulton, III, BetaNews
April 20, 2007, 3:31 PM
Certain Dell PR managers must be infuriated. Last year, for Hewlett-Packard, it was the process of recovery from a costly CEO ouster that led to a boardroom scandal where members allegedly hired professional spies to break US terrorism laws to gain electronic access not only to other members but to the reporters they talked to.
For Dell, it was the outsourcing of its customer support center, a late product delivery on account of overheating, some public pictures of smoldering laptop batteries, and the matter of those stock option grants, the dynamics of which most people shouldn’t understand anyway. It should have been Watergate versus a batch of traffic tickets.
Are HP’s computers really that much better than Dell’s? Is there that much of a gulf in customer service and support between the two companies? Or, as IDC’s press brief postulated on Wednesday, does the credit really go...to Microsoft - specifically, to Windows Vista, for boosting the overall PC market growth rate 2.4% beyond what IDC thought it would be?
BetaNews posed this question, among others, to the PC Tracker report’s chief researcher, IDC analyst David Daoud: Does Vista truly deserve the credit? “I don’t believe so,” came Daoud’s surprising response. “There’s plenty of activity behind the scenes that end users really don’t see, that relates to the way that companies approach the market and go to market, and is what go-to-market strategies are all about.”
By “go-to-market,” Daoud’s referring to the strategy a manufacturer develops for taking the design it’s already produced, and selling it to its designated market. This takes into account “optimizations, operations, maximizing the channels, the use of how the channels work, reducing costs, improving efficiencies, [things] the average consumer doesn’t see or doesn’t recognize.”
So HP CEO Mark Hurd’s refocusing strategy, coupled with Acer’s surprise arrival as the #4 – or maybe the #3 – player in the world’s markets, made Q1 2007 a much bigger quarter than anticipated. And HP was the direct benefactor, even of its competitors’ efforts.
Is HP not simply acquiring the market share that Dell left behind, but truly rebuilding the PC market? “’Rebuilding’ may be a tough word,” Daoud responded. “It’s continuously looking at its channel strategy, at the way it approaches the market, making it a lot more efficient for its sales force to gain market share, to compete for bids.”
Consumers tend to think of marketing in terms of advertising; but in the enterprise, marketing has to do with direct contact. Here is where HP may have taken back the lead: “Things as simple as turning a response for a bid as quickly as possible, compared to the past, makes a huge difference,” said Daoud.
Accomplishing this may actually be a factor of using fewer people on the bid, not more – in HP’s case, he believes, one or two market reps as opposed to three or four. “They’ve streamlined their operations to such a point that they are much more flexible, leaner, faster, and that helps them compete versus a company such as Dell, that is going through a rethinking phase itself, where they’re [re-examining] their business model.”
The fruits of Dell’s re-examination – or perhaps the better word is “impact,” if you happen to be on the end that was cut rather than doing the cutting – may come in as much as nine months’ time. Jobs may be severed, and the executive ranks at Dell could shift dramatically – even new CEO Michael Dell’s own job security is believed to be variable. In the interim, HP has a wide open window of opportunity.
On top of everything else, there’s a bad luck angle to Dell’s predicament. It’s just bad news for Dell that it happened to be big where it didn’t need to be big, and too small where it needed to have grown more. David Daoud explains: “Dell happens to be sort of the biggest player in the space, therefore, anything that happens to that vendor is highly visible. So when you have bad publicity surrounding the [exploding] battery, shown on CNN and other places, certainly it’s bound to effect the company’s image. Having said that, part of their rethinking is really [about] how to address the inefficiency[, not the battery]. How do you get closer to the end user, how do you correct those errors and those perceptions of poor quality?”
Sony was the producer of many of those incredible exploding batteries, but it was Dell’s brand that faced the public when the heat was, literally, on. But the deeper problem wasn’t the exploding batteries as much as Dell’s incapability to manage the perception problem. If HP could ease itself around the possibility of its board members facing jail time, Dell should have cleverly negotiated its way around burnt plastic and botched phone calls.
“I think that it’s more a perception issue than anything else, a perception magnified by a business process,” IDC’s David Daoud told BetaNews. “What I mean by that is, how quickly a company responds during a crisis time eventually determines how it is perceived.”
Next: Is a new HP PC really that much better than a new Dell PC?
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