HP 2016 Industry Summit. Printing Reinvented

Following the announcements at the spring launch in Lisbon, HP Inc’s industry summit in Boston provided more insights into the thinking which will guide their development over the next five years.

This summit left us with a feeling of real dynamism and excitement in HP’s future strategy and plans. Everyone knows there are challenges in the office print market, and HP was open in acknowledging this, and recognising the impact on their print revenue. However, at the same time, they have a very credible strategy, and well conceived plans, to take share from the competition in the traditional core areas, and at the same time, to build new, higher value revenue streams, by addressing real customer needs, be they in the home, office, or graphics market.

The senior management team, led by Dion Weisler, were all on parade for this event, and it was hard not to warm to a group of such talented, charismatic, high energy individuals, who seem, in a relatively short space of time, to have gelled into a very effective team. One amusing quote came from Stephen Nigro, head of the new 3D printing business, who, when asked to put a number on growth potential, declined, saying that his boss (Dion) would set him a higher target, based on whatever number he mentioned.

HP is deadly serious in its goal of targeting the large pool of pages printed on A3 ‘copiers’

Focusing on office print, it is clear that HP is deadly serious in its goal of targeting the large pool of pages printed on A3 ‘copiers’.  They were at pains to make clear this does not mean that HP plans to launch a range of ‘copier’ style machines. Instead, they plan to make the most of their printer-based architecture, to match or beat ‘copiers’, with high output speeds and capacity, good paper handling, and competitive cost-per-page, achieved partly through dramatically lower service intervention costs.

HP also understands that Ink Jet will not work for all customers and applications

Of course, HP recognize that they will need to be more competitive on consumables costs as well, and to this end, gave a further glimpse into the planned extension of Page Wide Ink Jet technology into a new range of A3 devices, which will offer both high output speed and low cpp, with copier style paper handling.
However, HP also understands that Ink Jet will not work for all customers and applications, and that they need to be competitive with Laser as well, which has always been a difficult problem for them to solve. It appears that HP has some radical new plans for a much more competitive range of A3 LaserJet products, although they were not ready to divulge any details, and were coy when asked about the engines for these new products.

From other sources, IDeAs understands that there may be quite a surprise in store here.

The other big areas of focus for office print are in print security, which is becoming an increasing priority for customers, and where HP has a big lead over competition, and in what HP is calling ‘Print-as-a-Service’ (PaaS). This takes MPS to the next stage of development, with more services and solutions, but will also potentially evolve into a broader ‘Managed Service’, integrating management of printers and personal systems. This raised a question on the possibility of moving towards a model of per-seat billing, which is a hot topic of discussion in the industry, and which HP confirmed they would be looking at.

Another interesting question concerned the apparent dichotomy between HP’s plans for more services and solutions, and the announcement at the same time of the sale of the HP Exstream production and customer communications software to Open Text. Dion Weisler’s answer to this question was that HP preferred a model of partnering with independent software companies, over owing the assets themselves, partly for reasons of priority in capital allocation, but also because independent software providers had more flexibility and could develop open, industry-wide solutions, by working with other vendors, as well as HP. This highlights the difficulty of aligning business models, go to market strategies and product cycles across different sectors within the industry.

The developments in office print form part of a broader HP strategy of targeting ‘pockets of growth’. One of these is to make mobile printing more easily accessible, for both office and home users, for example targeting the very large number of photos on mobile phones, most of which are not currently printed.

This leads into a related growth opportunity, to drive more supplies usage, not only by creating new types of print relevance, but also by driving share of supplies capture. The other big potential growth area is in Graphics, where HP aims to tap into a huge market opportunity, using digital technology in packaging, signage and décor, and working in partnership with leading consumer brands on product personalization.

On top of this, if the offering which HP is developing for the 3D print market, based on their Multi Jet Fusion TM technology and the HP ‘voxel’, turns out to be as good as it looks, then the sky could be the limit. HP is developing the technology in partnership with a number of high profile manufacturing companies, including Siemens, BMW and Johnson & Johnson, and is also working closely with certified materials partners, such as Arkema and BASF. However, there are some big questions that remain to be answered here, such as whether there will be industry standards, for example for file formats, and who will drive these, and how the technology will be taken to the market, and whether there is a role for the existing HP channel in this.

In conclusion HP put on an impressive show in Boston. Although the financial results remain relatively lackluster, the balance sheet is strong, and the company is highly cash generative – with print, especially supplies, generating much the greater part of the profit and cash flow. If the growth opportunities identified can be realized, there is potential to leverage HP’s robust financial structure to drive big increases in revenue and profit. The key issues for HP will be maintaining focus on a consistent strategy over the sustained period it will require to bear fruit, and avoiding being blown off course by short term results and investor concerns.
Watch closely over the next 12-18 months, to see how HP Inc. advances.