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May 27, 2010

When does size matter?

Yesterday the business press reported that Apple has now passed Microsoft in tech company market cap size. In plainer terms, Apple is the biggest technology company in the world's stock markets. Yes, even larger than HP's share price times its outstanding shares. Analysts and editors called this a milestone for Apple. But being biggest of all -- when does it matter to the customers, and not just us observers?

This is a good question to consider in the 3000 community, because size is a changing aspect of your 2010. A very large company (HP) is leaving the 3000 market, at years' end, to much smaller independents. Meanwhile, other HP operations have retained 3000 customers' purchases, because the big company's tech portfolio is broader, with more IT facets to offer.

When does size matter to a tech customer? When they want predictability, alliances and headroom. Gartner reported estimates of HP numbers in server market share this week. During the most recent quarter, Gartner said HP was No. 1, passing IBM in system revenue for the first time since 2008. Choosing the solutions of a leader evokes comfort from some companies. That kind of customer is large, and large companies never comprised a serious share of the number of 3000 customers. So does size matter to the 3000 market -- and how much?

So, on to those size matters. 3000 customers wanted predictability. It's part of the biggest motivation for owning a 3000 in the first place. Belt-and-suspenders IT, we called it. Predictability doesn't sound alluring at first, until you're tasked with keeping a company running 24x7 and expecting a long lifespan for your product investments. Can an Apple customer buy a system that will run software written in a long-ago IT generation? Not anymore, thanks to the new Intel support. Unlike HP 3000 apps, those on a Mac now fall off the table after a good decade of compatibility. There's now an air of unpredictability for the long-time Apple customer to endure. You upgrade to stay with the vendor. Before you know it, the sales spur Apple's stock price to a record level and it's the largest tech company in the world.

Does that size matter to an Apple customer who's running a business with Mac and iPhone/Pad products? What most of them relish is value and durability. An iPhone of two years ago still works well. A Mac of five years back still supports a sales force's mobile needs. A big company can extend a platform's life. Well, sometimes, when it makes sense to the vendor's business desires.

Let's look at the other advantages to selling from the top position. Alliances come to mind because HP doesn't invent as much as it acquires by 2010. Suppliers are eager to become part of HP's offering because the vendor has such a large customer base. In terms of number of servers sold, HP has led IBM for a long time. When you buy an HP solution today, allied companies are key to getting what you specify.

Since HP's $114 billion in sales leads all US tech companies, all those allies are smaller. Some a lot smaller, some still very large. Top-line vendors like Apple or HP like to portray their alliances as if they were a marketplace, all in orbit with the vendor's strategy and product line. Few 3000 companies are making a transition choice based on HP's products alone. Most customers follow applications when choosing to move. And HP's not selling apps -- just the glue that holds the IT environment together.

Headroom is the big-vendor advantage that HP talks about the most these days. What if your business grows 40 percent in a month? How will a smaller solution -- with older hardware, fewer virtualized environments -- keep up? Being ready for overnight expansion means a vendor is ready to sell you more services or servers. The operations are standing by, to twist a phrase from the late-night infomercials. You don't have to wait if business opportunity demands immediate response.

This upgrade-overnight plum isn't so juicy for the small to midsize business. The 3000 customer base is not growing at a Global 400 pace. Large companies must plan for overnight growth. When you absolutely, positively must have it overnight, size matters.

Apple's customers cut across every strata of company size. The iPhone has delivered growth and product churn to make a CFO's toes twinkle in their dreams. Investors see a bright future for the company and bid up those shares. But being No. 1, in any measure, is of little use once a supplier grows too large to deliver the value that a smaller company provides. More on that value tomorrow, when we look at When Size Does Matter, if that size is smaller.

06:10 PM in Migration, News Outta HP, Newsmakers | Permalink

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