HP's Enrique Lores On Staying 'Differentiated' From Xerox Amid Printer Partnership

The president of HP’s printing business speaks with CRN about the implications of the partnership with rival Xerox, the growth of managed print services and the early results from the Apogee acquisition.

This month, printer industry rivals HP Inc. and Xerox announced an agreement that will see Xerox sourcing certain A4 devices as well as entry-level A3 devices from HP.

While surprising on the face of it, the deal actually represented a continuation of an OEM arrangement that Xerox previously had with Samsung, prior to HP's acquisition of Samsung's printer business in 2017.

[Related: 5 Things To Know About The HP-Xerox Partnership]

Enrique Lores, president of Imaging and Printing at HP Inc., spoke with CRN about the HP-Xerox partnership and how it fits into his company's push for growth in the challenging printer market—as well as what it means for channel partners.

"In the market, the personalities of the two portfolios are going to stay fairly differentiated. The engines will be common. But all the software tools, the front panel, everything that customers will be interacting with is going to be different," Lores said. "So I don't think it's going to make the situation more or less competitive for our partners, because the differentiation between the two portfolios is going to stay fairly high."

When it comes to HP's printers, "we offer better security, we offer better manageability, and our user interface is significantly simpler than the user interface from Xerox," Lores said. "And for many years, the combination of these three factors has enabled us to have a significantly higher market share than any of our competitors."

Lores also spoke about the growth of managed print services—and how that ties into HP's efforts to reverse its supplies revenue decline—and discussed the early results of the company's 2018 acquisition of European managed print services provider Apogee.

"We are really driving a big transformation of the business, by growing our printing-as-a-service business," Lores said. "We are really committed to the channel. And as we change our business, we want to make sure that they change with us, and that we help them as much as we can in this transition."

What follows is an edited portion of CRN's interview with Lores.

Given that Xerox is also a competitor, how much did HP have to deliberate on whether to expand the relationship with Xerox?

For us it was a very important decision. But I think it's important to understand that when we think about the print market, this is a market where these types of relationships have existed for a long time. We have actually been working with Xerox, through the previous Samsung company, for a significant time. So the decision was not so much about whether we wanted to establish the relationship or not, it's about how much we wanted to expand it. The print market is a market that is not going to be growing significantly, which really means that all of us have to look for opportunities to combine our assets in a more efficient way. And this what this deal is really putting on the table. It enables us to sell Xerox a big part of our portfolio, and enables them to integrate it into their offering. So it helps both companies to grow, and helps both companies to be more efficient.

From a channel partner perspective, doesn't this create more competition for HP partners?

In the market, the personalities of the two portfolios are going to stay fairly differentiated. The engines will be common. But all the software tools, the front panel, everything that customers will be interacting with is going to be different. So I don't think it's going to make the situation more or less competitive for our partners, because the differentiation between the two portfolios is going to stay fairly high. For our partners, what this gives them is that we will be more competitive and our revenues will be increasing. They will be getting the benefit from the fact that they will be working with a more competitive company in this case.

What are the biggest areas of differentiation in HP printers that you would want to highlight?

First is all the work that we are doing around security. Security is today one of the key problems that any IT department faces, and HP printers are the most secure printers in the world. We have been driving this message for three years now. We have seen that it has been really impactful, because it really addresses one of the key pain points that businesses have today. We're both building security in the printer and also in how the printers are managed. We really have been able to differentiate our portfolio and to gain a lot of momentum.

That security and that management that you're talking about, that's not coming with the package that Xerox is getting?

No. What Xerox is getting are the print engines. They get the parts of the printer that manages paper and puts color on paper. They are not getting any of the software, they are not getting any of the management applications, and they are not getting anything related to security. This is why I was saying that the personalities of the two portfolios are going to stay fairly differentiated—as differentiated as they have been until now.

We offer better security, we offer better manageability, and our user interface is significantly simpler than the user interface from Xerox. And for many years, the combination of these three factors has enabled us to have a significantly higher market share than any of our competitors.

Another thing that differentiates HP printers is our JetAdvantage system that enables our customers to develop applications and connect their workflows to our partners. [At Reinvent 2019], we announced that now it will be very easy for developers to build applications that will connect workflows in the cloud from any different vertical, from many different applications, to our printers. We have built a portfolio of tools that developers can use to build these applications. These can be used whether it's in a legal firm, in a hospital, in many of our different companies, to really simplify the process of uploading documents, downloading documents, personalizing documents. This makes sure that we really deliver a very simple experience when dealing with a document workflow in a corporation. This will stay as a unique technology to HP.

With HP’s recent decline in supplies revenue, how big of a part of your strategy is managed print services?

Managed print services is a critical part of our strategy—not only because of the supplies situation, but also because of the overall transition that we are driving into printing-as-a-service. Business customers, managed through services, is our answer and our offering to that transition. This, from a supplies perspective, is important because it enables us to make sure that when customers are printing, they are using always HP Original supplies—which we think enables our partners and our customers to have a better experience. They get better quality, and their system works more reliably, so reliability is higher. And eventually, this translates into a total lower cost, because the maintenance of the printers is significantly reduced. So using [HP] supplies is really a way we have to deliver a better value proposition. And by integrating that into managed print services, we make sure that this happens for every customer that we are servicing through the program.

The idea is that most managed print services agreements include supplies as part of it, so customers are less likely to go online to purchase supplies?

Yes. Actually all of managed print service contracts include supplies. And also we are now working with our channel partners to make sure that when they offer their own managed print service programs, they also include in the programs HP Original supplies. It's part of how we are defining the programs, to work with partners that are evolving into the contractual space.

What are you looking to do to continue growth in managed print services with channel partners?

There are two things. One is, within the last year we have significantly expanded our portfolio —adding A3 to our portfolio has been a very important way to make sure that we have solutions for even more deals. So, continuing to grow in A3 and continuing the innovation in A3 is a critical part of our strategy. And then the work we're doing with JetIntelligence and building JetIntelligence into our systems is the second part of the strategy. And then simplifying the tools for our partners as they support our portfolio. As part of the A3 strategy, we've talked about smart delivery services, which enables our partners to deliver services to their customers in a simpler, and lower-cost, way.

Are partners moving to contractual services as quickly as you would like?

We are seeing that most of the partners are starting the transition to move into contractual, to move into services. But we are also realizing that the changes they need to go through are very significant. There are many partners that have been in this space for a long time and have been very successful. And many partners are trying to evolve, and some of them are succeeding, and some are not. I think the key thing is that when a partner embarks on this adventure, they need to realize that they will have to go through very significant changes. They need to change their processes, they need to build skills in their company that they many times don't have. So really my advice to partners is that they build a very comprehensive plan, because they need to do the change because this is where the industry is going. But they should not underestimate how difficult it is going to be, what investments are going to be necessary, and the time it will take for them to be successful …

We are really driving a big transformation of the business, by growing our printing-as-a-service business. We are really committed to the channel. And as we change our business, we want to make sure that they change with us, and that we help them as much as we can in this transition.

Can you provide an update on the results from the Apogee acquisition?

Let me give you some perspective for why we did the acquisition. We are transforming print into a service business, and this is what we call printing-as-a-service. In the commercial space, we have three strategies. For large corporations, we are going direct. For small and medium businesses, we are going to be doing that through the channel. Partners are a critical part of our strategy and they will continue to be a critical part of our strategy. But we also have seen that in order to capture a portion of the service business, we need to establish a closer connection to our customers. This is why we have identified that in some cases, we are going to be buying a company like Apogee that will help us to build these more direct relationships with our customers. It is a complementary strategy to our overall plan in the SMB space. It will only represent a small part of our business, but it's a good way for us to have more direct contact with our customers and to be able to also participate in the service business.

Apogee is doing well since the acquisition happened a few months ago. We are still early in the process, but we are already learning a lot from them—which was also one of the key objectives that we had. Because this is not a business where we have had direct relationships with our customers. And by working with Apogee, we are really learning what should be, what shouldn't be done. This also helps the rest of our partners—because the more we learn, the more competitive we will be and the better our solutions and products will be.