Riding the high seas of 3000 productivity

NewsWire Editorial

It's been an interesting 30 days to sail on the HP waters. Just after the Fourth of July weekend, an IBM executive in the AS/400 division fired off a bottle rocket designed to lure users away from the HP 3000. While IBM's mail was arriving on managers' desks HP launched its own salvo, a warning shot about its declining order growth. The stock market, which has provided ample evidence of HP's genius, promptly sold technology stocks straight down for several days. HP lost 12 percent of its share price in a day. You could feel the prick in that balloon of confidence that's fueled so much technology growth.

Coupled to the warning about falling orders was news that HP was getting out of the disk drive business. The problem isn't with HP's designs as much as it is with the struggle to roll them out faster than the competition, and to sell them, of course. The disk drive business news contains a hint of why the HP 3000 is a safe investment for both customers and Hewlett-Packard itself. In a word, it's different. That difference may present a challenge to marketing managers, but it's the best protection of HP's customer base and the best assurance your investment is working as hard as possible.

Over in the disk drive world, standards are the law of nature. Products must work with the widest range of systems, so mass storage has become a commodity item. Commodity items demand a finely tuned manufacturing and marketing organization. Time to market is shortest in commodity markets, where everyone has the same fundamental technology. Competition is always a step ahead or behind, but no more.

Watching HP drop its disk drive business was a lot like seeing Cleveland lose its football team, or learning that Eagle Brand chips aren't at the grocery anymore. A high-quality alternative had been closed down -- a victim of market pressures. HP talks of cannibalizing its businesses, and here's an example of what it looks like. No profits, no hope, no division.

HP had done all the right things in drive designs, from the days when it took a run into the business by manufacturing its first 3.5-inch drives. I got to tour the Boise Disk Memory Division in 1988, a few months after the 7933 failed head panic. The panic caused HP to replace thousands of head drive assemblies simply because a few lots had failed. It was the only way HP could restore confidence in its disks at the time. I was impressed with what I saw in the HP factory and in its management. Eight years of competition later, HP was pulling the plug on a business it had recently spun off to sell more units outside HP.

In the 12 years I've watched HP, the disk drive dive is the first wholesale exit I've seen. Even the portable computer operation in Corvallis, Ore. transformed itself into the OmniGo and handheld business. HP sees no future in building disk drives. And that makes me wonder about its forecast for riches in the Windows NT and Unix markets. Because if HP couldn't survive the disk drive wars, how will it hold a place in those commodity systems markets instead?

Of course, as an HP 3000 supporter I don't have to worry actively about the future of Unix and NT. The 3000 -- with the most satisfied customer base in commercial computing -- doesn't rely on the success of other HP divisions. The funding model for the 3000 group is based on its sales alone. It's a matter of conjecture, but if HP were to exit the Unix system business like it dumped disk drives, the move should have no impact on the HP 3000's future. I heard that kind of rumor in the last 30 days, one result of that rush of wind from the balloon.

Okay, selling disk drives is a different business than selling commodity systems. But the similarities are important to HP 3000 customers. Drives, like the HP LaserJet empire, need a crack manufacturing and marketing machine. Compatibility is paramount. Design genius can go unrewarded without marketing emphasis. The value of the product is always determined relative to a competing product.

In contrast, HP 3000 value is measured by business productivity. MPE/iX is the long-range clipper ship, expected to be self-maintaining for years. And despite the relative lack of new applications or customers, those who have invested in the 3000 are happier than any other commercial computer customer, according to Datapro.

That lack of applications is the only ripple on the 3000's pond for most customers. It comes as no surprise that IBM would find a way to call that ripple a wave by sending a letter asserting that HP is divesting from the 3000.

But saying that HP's indefinite plans about 64-bit support are a sign of trouble doesn't make it so. The IBM sales letter suggested that many customers were unhappy. But it seizes on their uncertainty about the future while ignoring their satisfaction about the present. IBM's "Proposition 400" needs an unhappy sea of users to make waves. It looks like it's an idea that doesn't hold much water -- unless you enjoy the whitecaps of wholesale database and operations changes.

IBM's effort does have some value, even for the managers who hooted the letter into their roundfiles. It proves that a system tuned for higher margins will always have market protection if it delivers higher productivity. Commodity products like Unix and NT can struggle to deliver that productivity for their users.

With news of falling Unix orders and disk drive business crashes, HP is tasting its first setbacks in a long time. Now IBM wants to market to its most loyal base, urging you to consider its non-Unix system. A great company like HP always finds its way out of adversity, sometimes changing its beliefs in the process. One of the sure rally points in a tough commodity market should be the HP 3000, different and more productive. If commodity computing has to be built on the raging surf of high volume, nothing less than top-flight manufacturing and marketing are needed. Those are costly components, especially if orders drop. HP 3000 customers understand very well how much better an efficient business model works instead. And it will take more than a letter to rock that boat.

-- Ron Seybold

Copyright 1996, The 3000 NewsWire. All rights reserved.