HP 2007 Annual Report Download - page 22

• independent software vendors (“ISVs”) that provide their clients with specialized software products, frequently
driving sales of additional non-HP products and services, and often assist us in selling our products and services to
clients purchasing their products; and
• systems integrators that provide various levels and kinds of expertise in designing and implementing custom IT
solutions and often partner with HPS to extend their expertise or influence the sale of our products and services.
The mix of HP’ s business by channel or direct sales differs substantially by business and region. We believe that
customer buying patterns and different regional market conditions necessitate sales, marketing and distribution to be tailored
accordingly. HP is focused on driving efficiencies and productivity gains in both the direct and indirect business.
TSG manages enterprise and public sector customer relationships and also is charged with simplifying sales processes
across our segments to improve speed and effectiveness of customer delivery. In this capacity, TSG manages our direct sales
for both volume and value products including industry standard servers products, UNIX®, enterprise storage and software and
pre-sales technical consultants, as well as our direct distribution activities for commercial products and go-to-market
activities with systems integrators and ISVs. TSG also drives HP’ s vertical sales and marketing approach in the
communication, media and entertainment, financial services, manufacturing and distribution and public sector industries.
PSG manages SMB customer relationships and commercial reseller channels, due largely to the significant volume of
commercial PCs that HP sells through these channels. In addition to commercial channel relationships, the volume direct
organization, which is charged with the management of direct sales for volume products, is hosted within PSG.
IPG manages HP’ s overall consumer-related sales and marketing activities, including our annual consumer product
launch for the back-to-school and holiday seasons. IPG also manages consumer channel relationships with third-party retail
locations for imaging and printing products, as well as other consumer products, including consumer PCs, which provides for
a bundled sale opportunity between PCs and IPG products. In addition, IPG manages direct consumer sales online through
HP Home & Home Office.
Manufacturing and Materials
We utilize a number of contract manufacturers (“CMs”) and original design manufacturers (“ODMs”) around the world
to manufacture HP-designed products. The use of CMs and ODMs is intended to generate cost efficiencies and reduce time to
market for certain HP-designed products. Third-party OEMs manufacture some products that we purchase and resell under
the HP brand. In addition to our use of CMs and ODMs, we currently manufacture finished products from components and
sub-assemblies that we acquire from a wide range of vendors.
We utilize two primary methods of fulfilling demand for products: building products to order and configuring products
to order. We employ building products to order capabilities to maximize manufacturing efficiencies by producing high
volumes of basic product configurations. Configuring products to order permits configuration of units to the particular
hardware and software customization requirements of certain customers. Our inventory management and distribution
practices in both building products to order and configuring products to order seek to minimize inventory holding periods by
taking delivery of the inventory and manufacturing immediately prior to the sale or distribution of products to our customers.
We purchase materials, supplies and product subassemblies from a substantial number of vendors. For many of our
products, we have existing alternate sources of supply, or such sources are readily available. However, we do rely on sole
sources for laser printer engines, LaserJet supplies and parts for
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