HP 2009 Annual Report Download - page 15

• independent distributors that sell our products into geographies or customer segments in which
we have little or no presence;
• original equipment manufacturers (‘‘OEMs’’) that integrate our products with their own
hardware or software and sell the integrated products;
• 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 the depth and breadth
of its coverage in addition to efficiencies and productivity gains in both the direct and indirect business.
The HP Enterprise Business manages most of our enterprise and public sector customer
relationships and also has primary responsibility for simplifying sales processes across our segments to
improve speed and effectiveness of customer delivery. In this capacity, the HP Enterprise Business
manages our direct sales for value products including 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. The HP Enterprise Business 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. In addition, PSG manages direct online sales through
the Consumer Exchange and the Small Business Exchange.
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.
Manufacturing and Materials
We utilize a number of outsourced manufacturers (‘‘OMs’’) around the world to manufacture
HP-designed products. The use of OMs 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 OMs, 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
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