Hp Case Study

Case: Hewlett-Packards Merced Division

Q-1 In summer 1998, what is the position of the Enterprise Server Group (ESG) in its industry? How has it evolved? Why?

In summer 1998, the Enterprise Server Group (ESG) of HP realized a fall in revenues and profits.Jim Davis, the General Manager of the HP IA-64 program for ESG, had to make some crucial decisions on whether HP should continue to allocate major portion of the resources to improving it’s proprietary UNIX-based Performance Architecture (PA) based on a HP RISC microprocessor or whether they should shift most of their resources to develop workstations and servers which were based on a new chip, called Merced, based on it’s totally new architecture, called IA-64.

In 1997, ESG was formed at Hewlett-Packard in order to refocus its efforts in enterprise computing. ESG formation, though a result of response to increasing competitive pressures, came up with high performance systems which were highly needed by it’s customers to run their business and function their IT infrastructures. By the end of 1997, ESG had an installed base of more than 1.3 million UNIX systems worldwide. The sales touched $10B in 1997 and total market estimated to be worth more than $60B. HP used these systems because they wanted to enhance the performance of their computer systems way beyond they could ever achieve from the components designed and sold by third party vendors.

2. Why did HP get involved in developing the IA-64 architecture? Analyze the strategy.

Though RISC chips enabled the manufacturers to offer high-performance machines needed for enterprise computing, there was still a belief among many, including Davis himself, in the industry that RISC architecture was approaching the limits of its performance. Also the production costs of the RISC chips were not so attractive when compared with the low cost options from other competitors like Microsoft and Intel.

Hence, HP got involved into jointly develop a new...