If you Google “win-win business relationships,” you don’t have to search long before HP and Canon’s OEM alliance comes up. It’s in almost every win-win-related article, a number of business books, and is taught in business classes across the country.
Like any 30 year marriage, Canon and HP have had their share of their ups and downs, but the companies continue to generate much of their revenues and an even greater portion of their profits from the relationship, creating a financial bond strong enough to withstand their conflicting role as competitors, dramatic currency and leadership shifts, and just about anything else the industry could throw at them.
Because of that, it was not surprising when the focus of many editorials and reports on HP and Sharp’s new A3 MFP supply alliance gave similar levels of coverage to the deal itself with how threatened Canon must feel as a result of it.
To recap, the new HP-Sharp alliance effectively provides HP with a range of Sharp-based workgroup to light production A3 MFPs that carry the HP brand (but not LaserJet), will eventually be serviced by HP, and will exclusively sell into larger HP MPS accounts. The new line significantly raises HP’s own-branded office MFP product ceiling, improves its lineup balance, and gives the vendor a new level of service control over the A3 MFPs in its enterprise fleets. Meanwhile, the deal provides Sharp with a much needed new revenue source in the midst of its notable financial struggles, while relatively safely avoiding conflict within its own channels.
Why Everyone Says this is Bad News for Canon
Some readers may notice that there weren’t any Canon mentions in the above HP-Sharp alliance recap. However, among those knowledgeable of Canon and HP’s relationship, it is easy to see that this deal had everything do with their LaserJet partnership, and why it’s likely a concern within some parts of Canon.
Canon and HP’s relationship has seen increasing challenges in recent years, including print-undermining moves during the Fiorina/Hurd/Apotheker eras, painful forecast miss-cues from HP early in the recession, and HP’s continued efforts to create new alternatives to its Canon-based LaserJets (the latest of which being the Sharp deal).
Before now, these alternatives have primarily come in the form of HP’s prioritized office inkjets, which have expanded across all channels and customer segments, posing a notable threat to HP’s SOHO and workteam LaserJets, and will increasingly take aim on Enterprise segments going forward. In fact, it is worth noting that during HP’s analyst briefing held prior to the Sharp alliance announcement, HP highlighted its PageWide Pro X inkjet series’ role in its balanced MPS fleet strategy almost as often as the vendor mentioned the new Sharp-based A3s it was announcing. Really, the folks at Canon should be far more concerned about HP’s intentions around its homegrown inkjet portfolio than its gap-filling Sharp products (and many are).
Like the new Pro X inkjets at the low-end, HP’s latest A3 additions will now create an alternative to Canon-based LaserJets at the high-end of HP’s office lineup, likely cannibalizing HP’s Canon-based LaserJet A3 MFP portfolio that completed an impressive refresh just a few months ago.
The addition of these new Sharp-based A3s also effectively eliminates an imageRUNNER sales, supply, and service channel for Canon in the US and Europe (even if it was underutilized), and possibly threatens Canon’s imageRUNNER install base in its existing HP-owned enterprise accounts.
So I guess the “bad news for Canon” crowd may have a point. But they may be missing the big picture…
Why it’s Good News for Canon
Despite all of the above challenges to HP’s Canon-based LaserJet lineup and possible concerns over what this alliance may suggest about HP’s future product sourcing strategy, gap intelligence believes that Canon stands to benefit from this new alliance in a number of ways.
1) What’s Good for HP, is Good for Canon
For Canon’s LaserJet OEM business, the most immediate benefits will come from the enterprise MPS growth that HP is able to achieve due to its wider and more competitive lineup. Given the lineup expansion seen from many OEMs in recent years that has now made balanced A3/A4 fleets an enterprise MPS requirement and the similar need to include CRD support in many MPS deals, Canon would likely agree that HP’s chances of achieving MPS growth is now much stronger with these new A3 products in its portfolio.
Additionally, Canon surely realizes that each new HP MPS win will drive significant hardware and supply sales opportunities for HP’s LaserJet systems, which are still expected to dominate these MPS fleets for the foreseeable future, even if they are now sharing more placements and pages with HP Officejets and Sharp-based MFPs.
2) HP is Prioritizing Print
Canon should also be relieved that this new Sharp alliance is just the latest move from HP that is purely intended to grow its print business. In fact, some may argue that, after years of HP prioritizing other parts of its business (sometimes with IPG-funding), printing is as strategically-prioritized within HP as it has been in years.
3) There is a Lot to Learn from HP’s Strategy
The last bit of good news for Canon is only good news if Canon chooses to learn from its long-time partner and apply HP’s politics-free product strategy to its own operations. For over a decade, HP has unapologetically tasked its inkjet group to move up-market into the office segments dominated by its very own LaserJet products (SPT, Edgeline, Officejet Pro, Officejet Pro X, etc.), and now further expands the high-end of its laser lineup with Sharp-based MFPs, understating that it would much rather grow / maintain sales across its segments and technologies than lose it to a competitor. To misquote There Will Be Blood’s Daniel Plainview, in this strategy “HP’s… Straw… Drinks… HP’s… Milkshake!!!”
Canon has historically taken the opposite approach, doing just about everything in its power to keep each of its respective printing groups within their historically-defined product types and sales channels.
Canon’s market share numbers certainly prove that there is strength in this strategy, and its careful protection of traditional product and channel boundaries probably makes things a bit more pleasant during the company holiday party, but this strategy only makes business sense if the world around these nicely-defined business groups also remains stable. Unfortunately, the world is changing and it would be a lot easier for Canon’s respective product groups to adapt to these changes if they didn’t have to worry about product and channel jurisdictions.
If Canon applied HP’s more Darwinistic approach to its technologies and business units over the last several years, it is very possible that Canon’s portfolio and market positioning would be quite different today. Following this HP-style strategy, it is likely that Canon would have offered enterprise-class imageRUNNER A4s a lot earlier and more consistently (sorry imageCLASS and HP groups), it’s conceivable that Canon would already be on the list of vendors pushing page-wide inkjets into enterprise channels and fleets (sorry imageCLASS, imageRUNNER, and HP groups), it’s conceivable that Canon would have pushed its dealers into MPS a lot earlier and more aggressively (sorry HP group), and you could bet that Canon would be the vendor providing HP with these new high-end A3 MFPs instead of Sharp (sorry imageRUNNER group).
It sounds brutal and there are ways to do this through collaboration, rather than internal competition, but this strategy is a lot safer way to make sure a company’s bases are covered as industries inevitably change. And by now, I don’t think Canon should feel too bad about saying “sorry HP” anyway.
Overall, I feel like this could be one of the few win-win-win deals seen in the business world. HP improves its lineup and MPS capabilities, Sharp gets a valuable new cash source, and Canon’s most important customer likely just got a bit stronger – thus improving its LaserJet OEM channel.
There is less of a guarantee that Canon, or other similarly-segmented vendors in our industry, start being a bit more like HP and loosen up the boundaries around their print divisions, but it should at least be reassuring for them to know that they can change if they want to and there are proven benefits to this approach.
