Compaq shifts strategy for hardware sales

Compaq Computer Corp.’s announcement last week that it will increasingly tie its hardware sales to life cycle services and custom support addresses a growing need in the enterprise market, according to users and analysts.

Compaq is changing the way it delivers hardware servers, PCs, handhelds and storage devices to enterprises. Instead of selling hardware and services as separate components, the vendor will offer packages that bundle machines, services and support, said Peter Blackmore, an executive vice-president at Compaq.

The focus will increasingly be on delivering computing resources as a utility that users will be able to buy on a usage basis, Blackmore said.

Compaq’s rivals have led the way toward this model. Hewlett-Packard Co. earlier this month introduced a usage-based purchase option as part of a move toward a more services-led approach. Similarly, IBM Corp. has been focusing on services for some time and already earns more than one-third of its revenue from selling them.

As part of Compaq’s strategy, which it calls Computing on Demand, the company has set aside US$500 million to acquire an IT services firm.

A recent five-year, multimillion-dollar agreement with Blue Cross/Blue Shield of Michigan is an example of the direction in which Compaq wants to head. Compaq’s global services group is providing custom, enterprisewide help desk support for more than 10,000 PCs, as well as on-site deskside software support, remedial maintenance and asset management services at Blue Cross locations statewide.

The arrangement makes for better end-user support and lowers costs while allowing Blue Cross’s IT staff to focus on applications that improve customer service, said David Doney, director of IS customer service at Blue Cross.

“When we got into this thing, we wanted to have a company we could truly partner with, not just a vendor,” Doney said.

Such arrangements could work with technologies that aren’t very customized, said Sean Nolan, chief technology officer at Inc. an online retailer based in Bellevue, Wash.

“I would see the value for stock business systems like desktops, laptops and other systems where I didn’t have my own business logic intertwined,” Nolan said.

But Compaq needs to flesh out the details of its plans to offer usage-based pricing options as part of this new services thrust, said Gordon Haff, an analyst at Aberdeen Group Inc. in Boston. Details such as the metrics that will be used to price usage, or even how usage will be measured, have yet to be released.

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