HP will not compete with commercial printers by selling Indigo presses to Corporate America. Corporations can purchase all of HP's products (servers, computers, software, desktop printers) except Indigo presses. Their stated plan is for Corporate America to work with HP to find a commercial printer that has an Indigo press. (Or Corporate America, should it desire to purchase a high-end digital printing device, could seek the assistance of another vendor like Xerox.)

HP acquired Indigo because it was in need of high-end devices to compete against Xerox’s iGen3 and others within Corporate America - not the world of commercial printing. But something has changed along the way. This change in strategy has gone unnoticed by most everyone, but the implications for printers, corporate customers, HP shareholders and competitors cannot be ignored.

HP is a huge and diverse company with 2002 sales of nearly $60 billion. Indigo’s annual sales contribution is estimated at less than $200 million. But this is no small matter. This strategy puts HP Indigo smack up against HP’s stated vision for selling to Corporate America. It limits Indigo to one market - printers. More importantly, it recreates the product gap HP wanted to eliminate which makes the acquisition of Indigo even more puzzling.


Brief History


In September 2001, HP acquired Indigo for $629 million in HP common stock and a potential future cash payment of up to $253 million contingent upon Indigo's achievement of long-term revenue goals.

WhatTheyThink.com touched on HP’s projected selling strategy in a special report published right after the acquisition was announced. (Benny Landa, Indigo and HP: Three Years of Wheeling and Dealing - 11.26.01) The report concluded that HP would obviously continue to sell Indigo presses to commercial printers, but would also sell presses to Corporate America.

The WTT report cited company sources and also included a quote from a speech CEO Carly Fiorina gave at the IDC European IT Forum in November of 2001. "HP wants to help our business customers save money in the printing of annual reports, customer brochures, and other types of printed collateral by bringing these capabilities in-house so companies can print materials like these on-demand. One CFO we talked to said he'll save $25 million a year by reducing his storage and carrying costs for obsolete printed materials."

This vision is without a doubt the correct path for HP and HP Indigo. It demonstrates that in Ms. Fiorina, HP has a leader with a strong grasp and understanding of the market.


April 2002: The PR Play?


But hold on. By the time the On Demand Show arrived in April 2002, it appeared that someone at HP convinced Ms. Fiorina that her vision was in need of a change.

Carole Alexander, covering the On Demand Show for WhatTheyThink.com (05.02.02) reported the following: "HP Indigo executives said their intent is not for their digital presses to reside in the in-plant, an area where HP has no vested interest, but with commercial printers. The company plans to influence print demand by creating a clear path from the data to the commercial printer. The statements were made by Bill McGlynn, VP and General Manager of HP Digital Publishing Solutions, and Indigo Founder Benny Landa. The comments were in response to concerns that HP Indigo would compete with printers by placing on-site facility managements or presses within companies."

Who was the architect of this strategy change? Could it be Professor Landa in the Lounge with the Lead Pipe or Colonel McGlynn in the Library with the Candlestick? At some point, I imagine Ms. Fiorina will emerge from the Study to resolve this mystery.


HP Already Competes with Printers


HP Indigo is trying to convince printers that they are the best and only choice if printers want a "printer friendly vendor." At their Graph Expo press conference, Mr. McGlynn stated that “HP does not compete with printers, like one of our competitors.” This message was an obvious slam against Xerox. I understand that printers would prefer to purchase equipment from companies that do not compete with them, but almost every equipment manufacturer, including HP, sells to corporations either directly or indirectly through dealers. And when they do, some printing dollars are lost.

HP has been competing aggressively with printers and prepress organizations for quite some time now. HP’s large format printing group has taken millions of dollars out of the pockets of printers by selling large format devices to corporations, advertising agencies and design firms.

In the non-Indigo portion of HP’s web site, the company provides a handy online print cost calculator that illustrates exactly how much money a business would save by purchasing HP printers and taking their printing in-house. After briefly filling in the information, a company can see the cost-per-page versus a local offset printer and a local On Demand printer. Here is the URL: http://www.hp.com/sbso/productivity/color/print_cost_calc.html

(One interesting point is that HP is inadvertently selling against HP Indigo. This calculator, again located outside the Indigo area of HP’s site, illustrates the money that can be saved by a company printing their work in-house and away from the local On Demand printer.)

This information is all part of HP’s web site devoted to small and medium size businesses. I wonder when HP Indigo will integrate these well-done, competitive features into their section of the site.


HP Indigo’s Strategy is at Odds with HP’s Enterprise Publishing Strategy


A closer examination of HP Corporate and HP Indigo show two strategies clearly at odds. At the heart of HP’s Enterprise Publishing strategy is Ms. Fiorina’s vision for transforming business communications. The plan is without question the future of corporate business communications and the future of printing.

The plan outlines HP as being the "One" company to deliver on every aspect of this vision. From hardware and software to printing devices, HP has it all. The acquisition of Indigo was the last piece in the corporate enterprise ecosystem puzzle.

But with the Indigo policy, Corporate America cannot reap the full benefits of HP’s corporate enterprise concept. The CFO Ms. Fiorina quoted will not save $25 million, without the entire corporate communication and printing ecosystem involved. This includes all in-plant and facility management operations.

As CEO of Indigo Mr. Landa has already proven that this strategy does not work. Commercial printers will not take HP to the Promise Land. One must wonder why a company of HP’s stature would risk resurrecting a failed strategy? Betting the digital/variable printing future on commercial printers, which is what HP has effectively done, is like betting that in any of our life times we are going to see Amtrak deliver a high-speed passenger rail service from New York to Los Angeles.

What’s worse is they have tied a rope around HP’s entire corporate sales force.

The choice for the prospective CFO in Corporate America is:

- To buy all HP’s IT infrastructure bundled with some plan that has the company outsourcing their high-end printed material to a printer down the street with an Indigo, or

- To buy all HP’s IT infrastructure and call Xerox for high-end color output.

Folks, a CFO of a corporation does not care about the debate over whether or not Xerox competes with a printing company. They either save money or people get laid off. If HP wants to sell to corporations they need to forget about the printers sensitivity on this issue and deal with the people who really control the money - corporations and their CFO’s.

Going up against companies like Ikon and Xerox should be obvious and financially compelling. Over the last few quarters, Ikon has routinely touted excellent growth in their facilities management business. HP’s lack of high-end b/w devices and lack of a structure for administering on-site facility managements are low barriers. HP could solve those issues immediately.

At some point HP will be forced to regroup and return to Ms. Fiorina’s more sensible and viable business strategy for HP Indigo. The only question is when and how. I realize how these things work. Ms. Fiorina may still have her hands full trying to digest the Compaq acquisition. The memo about this whole mess is probably still on someone else’s desk and won’t reach her for quite some time. But I predict a change and the sooner the better for Corporations all over the world.

I can only speculate how it will happen. Maybe Ms. Fiorina will be visiting one of HP’s largest corporate clients and she’ll see Xerox employees rolling in a brand new, $530,000 iGen3 into a brand new on-site facilities management ... and bang... a light comes on.

Billions of Dollars at Stake

Go ahead HP. Drop Indigo color presses in every large print buying company in the world. Get them using variable data printing. Take your huge ad budget and market one-to-one opportunities. Educate large print buyers about how to use their databases. Tell these enterprises about 10% response rates with variable printing solutions.

Changing your plan will not only make HP shareholders happy, but small and medium businesses will come to the party as the market matures. This will translate into sales all across HP's product line and yes, Ms. Fiorina, the vision you spoke of back in November of 2001 will become a reality. And yes, one day printers will realize that the more digital presses HP, Xerox and others sell to Corporate America, the better it is for them.

(Do equipment vendors really compete against printers? Would having more high-end devices inside Corporate America actually help commercial printers? I’ll discuss my views on this topic in the next column.)