HP Increases Emphasis On SMB MarketHP Increases Emphasis On SMB Market

With sales to small- and medium-business customers accounting for nearly a third of Hewlett-Packard's total revenue of more than $80 billion, the company is ready to intensify efforts to grow the market even further this year.

After increasing SMB sales about 11% to $24 billion last year, HP says it can again outgrow the total SMB market and post a similar 11% gain in 2005, says Kevin Gilroy, an HP senior VP who was named general manager of HP's SMB business unit in August.

"Small and medium businesses understand that technology needs to become more center stage for them," Gilroy says. "They can see that technology can level the playing field for them against much larger competitors."

With a worldwide market of about 78 million potential SMB customers, which Gilroy believes will grow to 100 million over the next two years, HP is in a unique position as a technology provider to supply myriad products such as printers, desktop and laptop computers, servers, and services.

"HP has a full spectrum of offerings, from the most simplistic to the most sophisticated," says Roy Boggs, an analyst at IDC. "But it's hard when you have revenue of $24 billion to grow at double digits. So even if they can add a billion dollars in revenue, that's pretty impressive," he says.

Two major trends that help drive the SMB market are the need for improved security and increased mobility, Gilroy says. In November, HP introduced a portfolio of secure products and services targeting small and medium businesses, including physical security layers for notebooks, desktops, and workstations; a data security layer for its iPaq handheld devices; and application and network security layers for desktop computers and servers.

Earlier this month, the vendor launched a number of mobility initiatives, including an expansion of its notebook portfolio, improved messaging and wireless capabilities for its iPaq products, and new loan programs.

Working with channel partners around the world will continue to be the primary agent for HP to interact with smaller businesses, Gilroy says. In Europe and Asia, more than 95% of HP's SMB revenue is derived through channel partners. In the United States, 70% of SMB revenue is generated through channel partners, and about half of all SMB revenue in Japan is made through the channel.

As part of a new initiative, HP encourages channel partners and independent software vendors to create "microvertical" products than can be layered on top of existing software for HP products that are aimed at specific industries, Gilroy says. There's also an evolution going on at small and medium businesses worldwide, where old-line leadership is beginning to retire and is being replaced by younger people who are more comfortable with technology.

"Baby boomers are beginning to retire, and they're turning their businesses over to their children," Gilroy says. "This next generation in the SMB space has a higher comfort level with technology. They understand it can be the backbone of their business."