HP Counts On Strategic Alliances To Fuel Growth

The company uses its Strategic Alliance program with 16 leading companies to coordinate short- and long-range product road maps for enhancing market opportunities collaboratively, says Vikki Pachera, VP of global alliances and business development for HP. Tightly aligned efforts, from technology creation to marketing, aid HP in keeping R&D costs minimized, as well as enable the company to enhance its scope in global markets where it otherwise has had limited visibility, she says.

"We partner to create new markets. We partner to create new business models," Pachera says. "Partnering is a strategy and we think it is in our DNA to do it well."

Some of the alliances have grown up over time, with a few having been nurtured over the past two decades. The Strategic Alliance program itself was formalized over the past two years. While HP doesn't have a specific number of alliances that it aims for, Pachera says it will likely remain between 12 and 20, a good size to allow for adequate resources on both sides to keep tight coordination.

The alliances have been forged with a variety of companies. Partners include software companies such as Microsoft, Oracle, SAP, and Siebel Systems; technology companies such as Advanced Micro Devices, Cisco Systems, and Intel; systems integrators such as Accenture and BearingPoint; and some overseas companies such as Hitachi, NEC, and Samsung. Some target specific new opportunities, such Nokia and the mobility market.

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Pachera estimates that 80% of HP's hardware and software sales last year were influenced to some degree by the alliance effort. More than $10 billion in revenue was tied to efforts with its software partners, and more than $1 billion to the systems integrators last year. "This is big business and rapidly growing business," she says.

The 16 alliances are managed at a worldwide level, with Pachera reporting directly to HP's chief strategic officer and chief marketing officer. The HP alliance effort is different from most other partnership programs because of its strategic focus, Pachera says. Most programs focus on "go-to market" only, finding tactical ways the partners can go to customers and into markets to increase sales.

Each of HP's alliances is staffed by a general manager from each company. Those managers help coordinate efforts that include regular meetings between the two companies' chief executives, technical officers, and VPs. The companies create a map of where they believe the two independent efforts are headed and where they can identify challenges and opportunities for joint initiatives. Multiyear business plans are created, and investments are generally shared.

One example is the .Net imitative launched in cooperation with Microsoft in 2002. Both companies invested $50 million to create a network of consultants and systems architects to help foster the use of .Net products and Web services with customers. By October 2004, that initiative had resulted in more than 1,000 projects with nearly 700 customers and had created more than $600 million in incremental revenue, the companies say.

One new initiative that Pachera says HP might not have engaged in without the strategic alliance program is an ongoing effort with Nokia. The two companies are working to expand the availability of visual media on cell phones via an FM radio signal. "It's a new market and a new business model," she says.

Steve Steinhilber, VP of strategic alliances and corporate consulting for Cisco, says his company's relationship with HP has been fine-tuned to allow the companies to compete together in markets ranging from business to consumer. Some recent collaborative efforts have included the integration of Cisco network-switching technology into HP's blade-server product line.

Another effort has been the "wireless building program," in which Cisco has combined its Wi-Fi technologies with HP's products and services to help business create buildings that efficiently and securely integrate wireless capabilities. HP has become the first Cisco partner to offer worldwide co-branded support services and first to achieve Global Certified partner status, Cisco's highest partner distinction, which requires certifications in regions around the world.

"The whole value is hopefully that customers get technologies that integrate well, are easier to use, and, from our perspective, can build new opportunities," Steinhilber says.

In some cases, companies within the alliance program are also competitors, Pachera says. "These are big companies. We are big, and there are overlapping areas," she says. "It can make for an emotional relationship both ways when we have to sit down and say, 'You're encroaching into a space we want to grow.'

"But that's reality," Pachera says. "Sometimes we can find a way where we can be collaborators. Conversely, there are times we have to agree to compete head on."