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HP split could mean enterprise contract savings

HP is scheduled to split into two new companies this fall, opening the door for IT shops to renegotiate contracts.

The upcoming HP split could give enterprises a chance to save money on renegotiated service contracts with the...

Silicon Valley-based tech giant.

After the split into HP Enterprise and HP Inc., scheduled to be complete on Nov. 1, HP Enterprise plans a simpler structure and a streamlined portfolio. HP Enterprise will focus on large business customers while HP Inc. will focus on items such as laptops and printers.

At last month's HP Discover conference, IT pros didn't voice serious concerns about support after the split.

Enterprises can use the HP split as an opportunity to renegotiate service contracts as HP seeks to provide stability for new HP Enterprise customers. It will get tax benefits after the split which means it can't be sold for two years. That stipulation provides "a point of security and confidence" for enterprise customers, according to Dana Gardner, president and principal analyst at Interarbor Solutions in Gilford, N.H.

The timing to renegotiate contracts will vary by region, he said, and will be a complex undertaking.

"There won't be a blanket approach to it," Gardner said.

Many enterprises will end up in a relationship with both of the new companies.

"If there is a synergistic relationship, those are some instances where there is going to be some back and forth," he said. "There may be chances for enterprises to negotiate favorable terms with the change in status."

In cases where the relationship is with just one of the two new companies, support changes may end up simply being a matter of altering the company name in the contract, Gardner said.

Some organizations may push toward deploying more virtual desktop infrastructure or mobile devices, rather than buy new PCs -- a shift that would move the business from HP Inc. to Hewlett Packard Enterprise.

"This may allow different types of conversations to happen," Gardner said.

There may be chances for enterprise to negotiate favorable terms with the change in status.
Dana Gardnerpresident and principal analyst, Interarbor Solutions

The contracts between enterprise customers and the two new HP companies will have to be managed separately, said Zeus Kerravala, founder and principal analyst of ZK Research in Westminster, Mass.

"Any negotiations right now favor the customer while so much is unknown," said Kerravala, who is also a contributor to TechTarget. The existing HP may be more likely to offer a discount than the two new companies, he said.

Unfortunately, HP has said very little about the impact the split will have on customer support. The focus on investor impact instead is part of a trend for HP, Kerravala said, noting that HP may have spent more time paying attention to its stock price rather than its customers in recent years.

Enterprises should also push to keep existing volume discounts in place if the organization is committed to HP infrastructure, he said. Many existing discounts should be grandfathered, he said.

"Customers should make sure the sum of what they are paying isn't more than what they are paying today," Kerravala said. "I'd be aggressive in what they are asking for."

A single point of contact at both HP companies, possibly through partners, could make things easier for enterprise after the split, although it is possible organizations may end up with contact with more salespeople.

"From a customer perspective I would want as little to change as possible," he said.

Robert Gates covers data centers, data center strategies, server technologies, converged and hyperconverged infrastructure and open source operating systems for SearchDataCenter. Follow him on Twitter; @RBGatesTT.

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What is your enterprise's No. 1 concern as the HP split approaches?
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That would a very good thing, as licensing costs are currently driving us away from HP tools like ALM and UFT. Still, they way HP works with preferred support vendors seems to give them an unfair advantage over their competitors, and really ties customers to them, so I’m not really anticipating any savings based on contract negotiations that do not come from reducing the number of licenses.
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