Forrester misses the point on the HP story

In Computerworld this week, my old Forrester colleague Frank Gillett commented on the impact of the HP pretexting scandal on CIO plans to purchase from HP.

The perception of Hewlett-Packard Co. by other companies has suffered somewhat as a result of HP's boardroom scandal, according to a survey by Forrester Research Inc. But only a few HP customers said the controversy would affect their purchasing plans.

The results are based on a small sampling of 44 responses to e-mails sent by Forrester to 240 members of its CIO Group. Among the current HP customers responding to the survey, most are keeping their existing purchasing plans intact, the Cambridge, Mass.-based industry analysis company reported.

"Three out of 28 companies did report a negative impact on their existing plans to work with HP," wrote Forrester analyst Frank Gillett, the main author of the research note. "This is surely concerning for HP, but Forrester believes that the poll results are not conclusive as to whether HP faces more than a minor problem."
...
Forrester recommended that CIOs at other companies ignore the scandal. "Unless the investigations threaten CEO Mark Hurd's position, Forrester believes there will be little impact on the company that is relevant to choosing whether to work with HP or not," the company said.

The note missed the major issue though. Scandals like this don't have their major impact on existing customers. They affect whether new customers will sign with the firm. By focusing on existing plans to work with the firm, Forrester is underestimating the scandal's effect. And just the anecdotal evidence Forrester reported showed that 10% of existing companies were seeing a negative effect.

I stand by my earlier prediction: this scandal is going to hurt HP's business in a real way. Watch out for a negative revenue surprise coming in its earnings filing for the fourth calendar quarter, regardless of whether this touches Mark Hurd or not. Criminal prosecution is a negative for customers, regardless of who is in charge.

Full disclosure: I have no positions in HP.

Technorati Tags: Hewlett Packard, Mark Hurd, Pretexting