Global supply risks

Does the HP Split Mean More Risk to Your Business?

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The most talked about subject in the American technology market has to be HP’s split into 2 companies: Hewlett Packard Enterprise Co., which sells business software, servers, storage and networking equipment, and HP Inc., which includes the former company’s personal computer and printer businesses. The breakup marks the biggest milestone not only in the company’s history but also among its peers in the business. After 76 years of dominating the industry as a single company, the split marks the end of an era.

But HP’s split is just one example of a growing trend among big companies. RR Donnelly announced the split into three independent publicly traded companies earlier this year. AIG has been mulling over the same decision for some time. In today’s market, agility and customer centricity are key to success, and these are difficult to attain in large organiziatons with numerous and unrelated service lines. In these examples, the splits are interpreted as strategic moves to enable each new, more focused company to maximize the profitability out of each service line.

For HP customers, the split comes as no surprise since it was announced last October. And since the company was already organized along similar lines as the two new companies, the transition is expected to be relatively seamless and there are no anticipated disruptions for existing clients. At this time, HP’s organizational divorce poses a relatively low risk to its business relationships with clients.

In other, more complicated splits, the impact on clients can be quite disruptive. The splitting company may decide to divide clients among new companies, introducing transition challenges as the accounts change ownership. The transition can also trigger numerous management and executive level exits, which can be detrimental to the success of any client projects they were assigned. In order to manage the situation effectively, you should take this time to evaluate your supplier, establish communication with them to voice your concerns and get clarity on the subject. Including key personnel clauses in new contracts or renewals will help minimize the impact of such attrition.

It’s also possible for the splitting company to shut down or discontinue entire service lines. In this case, you’ll want to evaluate your options and have a transition policy in place that will ensure continued and seamless transfer of business to your new service provider. Maintaining ongoing, clear communication with your strategic suppliers will help ensure that you have all information on your supplier’s roadmaps and investment strategies to make sure that they will continue to move in a direction that supports your goals and objectives.

Any change in your suppliers’ business operations is a trigger for you to assess the situation at hand. An organizational break up is generally not an anticipated event, but a well analyzed situation and a proactive action plan will help you make the best of your suppliers’ organizational changes.