HP’s Cautious Integration of 3Com’s H3C

As discussed in a previous post, many observers are curious as to why HP’s integration of 3Com will take another 18 months (or thereabouts) to complete.

In investigating the matter, I have learned that some parts of 3Com will be easier for HP to digest than others. The assimilation of 3Com into HP will occur at varying speeds, depending on the geographic and operational jurisdictions involved.

One major part of 3Com that will be slower to digest than others is H3C, the former China-based joint venture between 3Com and Huawei that evolved into 3Com’s R&D engine. H3C was a prime attraction for HP in its pursuit of 3Com, both for its relatively inexpensive engineering personnel and for its account presence and market share in China.

One reason for H3C’s success in China was that it was viewed as a Chinese company by China’s government. In China, that distinction is not insignificant. As China continues to pursue a policy of “indigenous innovation” that will see it favor companies and products of demonstrably Chinese provenance, HP’s ownership of a “Chinese company” might prove critical in allowing it to compete effectively for customer patronage in the country and to qualify for cost-saving government programs.

How does this affect HP’s integration of 3Com? Obviously, H3C is a big, important part of 3Com. HP will not want to do anything that compromises H3C’s status as a Chinese entity. Membership in that club has its privileges.

H3C’s market share and sales in China have faltered as Huawei has gone from partner to competitor. Meanwhile, Cisco and others are increasingly establishing R&D facilities in China to curry favor with the country’s authorities. Given the context, HP will not want to lose what made H3C and 3Com so attractive to it in the first place.

Just for fun, go to the H3C website. At first, set your location as North America. You’ll be directed to a page that sets H3C’s product portfolio firmly within the context of HP Networking. Now, go back to the H3C start page and set your location as Asia Pacific (English). You’ll now notice that there’s scant mention of HP Networking; it’s all H3C.The site even offers a promotional tagline that must make HP Networking’s U.S.-based marketing executives cringe: “H3C — IToIP Solutions Expert.”

H3C will continue to run its own show in China and in the Asia Pacific region for the foreseeable future. It is one of the reasons the 3Com integration will not proceed as fast as many observers think it should.

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