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Hewlett-Packard plans to pump $750 million into a new "Smart Office" initiative to market its computers, printers, and services to small and medium-size businesses, the company says.

Touting HP as the worldwide leader in the small and medium-size business market, HP Chair and Chief Executive Officer Carly Fiorina says HP will invest the money in research and development, marketing, sales programs, and services. The Smart Office initiative includes an announcement of more than 100 new products and services aimed at small and midsize businesses.

"Just as small and medium businesses are the lifeblood of our economy today, technology is the lifeblood of small and medium businesses, [and it is] so difficult and frustrating when that technology isn't all that it should be," Fiorina said at the announcement. "They spend their days worrying about customers, contracts, employees, and payrolls, and they don't need to be worrying about their technology."

New Products, Services

Among the pieces of the Smart Office initiative:

• HP Smart Finance offerings aimed at simplifying purchasing (through HP and its vendor partners), trade-ins, and recycling. HP will offer zero-percent financing or no payments until 2004, for three months beginning October 1.
  
  
• HP ProLiant servers with preinstalled Microsoft Windows Small Business Server 2003, which supports 75 users out of the box.
  
  
• New desktop systems, including a health-care PC, and a space-efficient package with a slim-line desktop PC and a flat-screen monitor.
  
  
• A variety of new printers, among them the HP Color LaserJet 9500, which HP touts as capable of creating professional, do-it-yourself marketing materials.
  
  
• HP Care Pack services, a set of warranty packages such as application support and data backup and recovery.
  
  
• An integrated support system that includes help from HP's vendor partners, resellers, online chat, and Web-based seminars.
  
  

HP will package the products and support together in end-to-end products that make sense for small and midsize businesses, Fiorina said. She took a shot at competitors who offer direct sales of PCs to customers. "There are some companies that market their products as [being] easy," she said. "The problem is, their vision of easy begins with the shopping and ends with the purchase, but the owning leaves a lot to be desired."

HP is announcing partnerships aimed at four small-business vertical markets: accounting, legal offices, real estate, and health care, adds John Brennan, HP's new senior vice president of small and medium-size business sales.

The small and medium-size business market for technology goods and services is about $460 billion a year worldwide and is expected to grow to more than $640 billion over the next three to four years, Brennan says. HP's chunk of that pie is $21 billion a year, making it the number one company in technology sales to such businesses, he says.

Mixed Response

The new Smart Office focus should help HP expand that market share, says Michael Haines, principal analyst with Gartner. "It's a realization or a confirmation of the importance of the small and medium-sized business market in IT," Haines says of HP's announcement.

However, Haines is critical of the limited number of small-business vertical markets HP is targeting with packaged products and services. Yet, considering how fragmented the market is, the HP vertical strategy is a good start, Haines adds.

Haines also praises HP for including its value-added resellers in its support and service plans for small and midsize businesses.

IBM has also tried to market to such businesses, Haines says. "We're seeing the major players now realizing what an enormous opportunity that market is," he says. "They also realize they'd better get their act together and get messages and solutions tailored to that market. That marketplace is tired of 'enterprise lite' being jammed down their throats, and IBM and HP obviously heard it."

But Crawford Del Prete, an IDC analyst, says HP's Smart Office initiative could give HP even more of an edge over competitors like IBM.

"They need to take a leadership role in the segment," Del Prete says. "HP has a huge opportunity to gain ground in a segment that has largely been underpenetrated by competitors like IBM. I think HP's biggest challenge will be to make sure that they can drive the [small-business] initiative across all of its diverse products and services, while communicating with its channel."

HP needs this initiative, which brings together the "right technology ecosystems for its products, and solutions for resellers that focus on [small and midsize businesses]," Del Prete adds.

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