Unlocking Opportunities for Growth – The Six Five On the Road

Patrick Moorhead: The Six Five is on the road here in Las Vegas at HP Amplify Partner Conference. It’s 2024. Dan, big headline here is AI, AI, AI and hybrid work.

Daniel Newman: Yeah, I think hybrid experiences, the next generation of work, I think we’re dealing with this pendulum swinging from a lot of remote work to a very, very hybrid work. And we’re here with a company that’s really, really focused with giving a next generation work experience with AI at the helm, AI powering that experience.

Patrick Moorhead: Yeah, 25 years ago when I worked at Compact Computer, we were all about partners and so was HP at the time. And years later, the two married together. HP said today on stage that 85% of its revenue comes through partners and what I’ve seen, it’s unwavering commitment through the years, not a kind of on again, off again. And that’s super important.

Daniel Newman: Yeah. Partners really need to feel that those that they commit their investment, their time, their energy, their training resources to are going to reward. They’ve seen companies come in, they’ve seen them come out and then they realize how much that can damage the long-term trajectory.

So a company like HP that’s been committed for so long and invested so much, I’ve been part of some other partner and customer advisory board meetings in the past just to see the amount of investment there. I think if I was a big SI, I would feel really good. And obviously they have more than just SIs, but big SIs and other partners. I’d feel really good about partnering with a company like HP.

Patrick Moorhead: Yeah. Bring in our guest, Dave McQuarrie. Great to see you. First time guest on the Six Five. Thank you so much for coming on.

Dave McQuarrie: Thank you for having me. Good to be here.

Patrick Moorhead: Absolutely.

Daniel Newman: So Dave, let’s talk about something that often gets missed in the tech sector. We often want to talk about the big enterprises. Right now, there’s been so much attention in the last year to about 10 companies that are buying a whole lot of GPUs. But let’s face it, tech is consumed… sometimes we say pocket to cloud, sometimes you say briefcase to cloud. There’s a lot of technology and SMBs by far outnumber fortune companies and they make a big impact on the economy. You’ve identified SMB as a growth market and a growth opportunity. Talk about that opportunity and why you think HP is well positioned to take that on.

Dave McQuarrie: Well, I mean first it’s a big opportunity because it’s a massive… as you said, a massive group of customers with an even more massive spend on IT. Second, they are not as well served by internal IT departments or providers across the industry as big companies are because big companies attract a lot of service and a lot of infrastructure. SMBs, particularly the S in SMB, don’t. And so they need this infrastructure to serve them rather than have others serve the infrastructure that serves them. And so for us, particularly the AIPC, and we may get into that, it’s a game changer for them if they can capitalize on it.

Patrick Moorhead: So as analysts, we’re not equity analysts, but we do cover your earnings and every quarter you talk about growth markets, growth segments, and you list off what those are and SMB being one of them. I’m curious, and I’m sure you love your children all the same, but what are some of the biggest areas of opportunities for partners inside growth markets and growth segments?

Dave McQuarrie: Okay, so for a start, I have a favorite child, but I’m not allowed to talk about which one it is.

Patrick Moorhead: Did you just out all parents that are out there?

Daniel Newman: Well, as long as he never says which one.

Dave McQuarrie: And I can even say her because I only have three girls. So for me, one is a favorite and I will never talk about which one that is. They all think they’re the favorite.

Patrick Moorhead: I mean according to my kids, they all accuse the other one of being the favorite.

Dave McQuarrie: There you go. Perfect, ’cause everybody thinks it’s the other one. But we do love all of our business partners, as you said at the opening, as you both said, with whom we have had a long and strong and successful relationship. I think the partners that are going to do the best in this next few years are those that embrace this change and those that are demanding of us that we help them.

And just take one example, almost all of our partners have some services capability. Some of them have a lot, others have a little. Those that come to us and say, “Hey, we’re terrific at these seven out of the 10, but these three we aren’t. You need to fill in that gap,” and others that come in and go, “We’ve got these three, but we need those seven,” that dialogue is going to be the most constructive. It’s going to be the most proactive and I think it’s going to be the most successful. So which partners are going to fill that bill? I don’t know. But anyone that does is going to be walking through an open door with HP.

Patrick Moorhead: And just so I understand, when you say the change, is it from a little bit of AI, to a lot of AI, to bag of parts, to solutions? Is this what you’re talking about, this type of change?

Dave McQuarrie: Well, yes, and I would say yes, it’s the move to a solution, the move to an outcome or an experience away from a device. We have a long history of successfully selling devices. We’ve got to move into… we have some businesses that sell experiences, Instant Ink, MPS. These businesses sell experiences today, pages or pages in both cases. But we’ve got to move to compute instead of the computer. We’ve got to move to the room instead of the camera. And if we can do that, the more we can do that effectively, the more we’re moving away from point spec sales at a price to what do you need done? You need hybrid work enabled. We can help you with that. You need to collaborate. We can help you with that. You need compute.

And you talked about AI, that AI curve is going to be, if not forever, it’s going to be for many years, and we’re just kind of climbing that capability curve. And I think a lot of customers are going to go there with us and some won’t go there straight away. And that’s beautiful about this is we’re going to get some customers that are following others in, who are picking up the products as they come in. Maybe a product’s been used for two years, it’s done with its original user because that next latest and greatest is what they need for their AI PC. But that device has got a lot of life left in it. Let’s get it to someone that can benefit from it. So lots of refurb and recurring revenue opportunities in there if we do it well.

Daniel Newman: A lot of that kind of thinking too is really, it’s an ASP growth driver, it’s a TCV driver. When a customer has a solution and we spend a lot of time focused on economic validation. When a customer’s like, “Well, this can drive this much economic value back to the business,” they don’t really start to think as much about the cost. And this industry is very guilty of box selling on the data center side, bent metal on the PC side. It’s lots and lots of shipped units. Yeah, PC has a great opportunity to change this. And of course, you started talking about the small business. Small businesses are big consumers of economic… anything you can give an economic advantage because they don’t have big staff, they don’t have big support. And if you said, “Hey, this can 10%, 20%…” these are game-changing differences.

So this is a partner conference though, and I’m kind of curious, are you thinking about how to incent more of your partners to play in that SMB sandbox, to create those experiences, to drive that longer-term economic opportunity, and how are you doing that?

Dave McQuarrie: So we are, let me just go back to your point about SMB. So the AI opportunity for if the cost of the average SMB employee, and it depends on your country, whether that cost is 20 or $30,000 or 70 or $80,000, but somewhere in that range… if the cost of the PC to make that person materially double-digit more productive is a couple of hundred bucks extra, which it is, I mean, you can do that math on the back of a napkin. So there is a really compelling value, economic value unlock of this.

To your question, how are we incenting, the first and biggest example we announced here recently is the SmartBuy program. This much faster, much more available, much more aggressively and competitively priced offering that starts with PS, starts with our PC business, but it’s going to roll across all of the portfolio pretty quickly. And then we have a number of other programs that are aimed at making it easier to deal with us. We have, as you said, we have great relationships. So it’s not about trust, it’s about enablement. We’ve got to make ourselves faster and easier. We’re working on that. We’ve got more stuff coming out on it.

Patrick Moorhead: Dave, things are moving fast. Your partners are moving fast. The actual buyers are looking for advice, they’re looking for solutions, which means you’re trying to transform your partners here and let’s time skip a year from now if we can. What do you want to have accomplished in the next year with partners? We’re sitting… let’s just pretend we’re having this interview next year and you can do a victory lap for what you and your team have accomplished.

Dave McQuarrie: Yeah, well I mean last year we came here and said a few things we wanted to do with and for partners. This year we’ve affirmed that we made good progress on them. We’ve got more to do and I look forward to doing that on this subject next year. So we can pull the tape out and have a look at how much of what I say now, I say then. The first is that they, and we will have made material progress in transforming our internal operations using AI. It’s not enough to sell it unless you use it, because it’s nothing as compelling as showing what you are doing with it versus, “I don’t, but you should.” That’s one.

Two, that we as a collective sales organization, ours and theirs, are educated on the subject and credible. Again, right now, all this AI conversation with very few exceptions, is really high level. We need to get down to use cases that customers can benefit from, savings, economic value, Dan, that they can get from and improve it, demonstrate it, roll it out, show the… if not the first, the use case, but then the business case and then the best practice so others can benefit from it. So if we’ve as an industry, as an ecosystem, become proficient at using, proficient at communicating and have implemented in enough places to prove the point, that’ll be a good year.

Patrick Moorhead: That’s great. Yeah, let’s put that on the calendar, okay?

Daniel Newman: Dave, I like the idea of when we say drinking our own champagne, but I do agree very much and I think there’s some metaphor for the way we talked about our favorite children, raising children, all that stuff in that too, doing as we say. So speaking of doing as we say, we said we’d let you get on with your event here. We do really appreciate you joining us here on The Six Five, Dave.

Dave McQuarrie: Thank you.

Patrick Moorhead: Thank you.

Dave McQuarrie: Thank you. Honored to be here. Looking forward to it. Next year, we can just make sure we go recap all these things.

Daniel Newman: Let’s do it again.

Dave McQuarrie: If by then my kids still don’t know who the favorite is, I look forward to getting back to you.

Daniel Newman: Means you’ve done it right.

Patrick Moorhead: That sounds great. Means you’ve done it right.

Daniel Newman: All right, everyone hit that subscribe button. Join us here for all of the episodes of The Six Five at HP Amplified 2024, here in Las Vegas. For Patrick and I, we’ve got to say goodbye for this one. We’ll see you all soon.