Loyalty and investment in Las Vegas
Announcing its latest channel strategy, HP promises to strip away the company's layers of complexity and to reward those that remain loyal, to win its fight against Dell and IBM. Sara Yirrell reports on the conference and on partners' reactions
When a company plans to hedge its bets on the channel, what better place to pick than the gambling capital of the world, Las Vegas?
Hewlett-Packard (HP) was certainly throwing high value chips on the table when it launched its latest channel strategy at its Global Partner Conference at the plush Venetian Hotel Conference Center last week.
With pledges to make significant investment in partners and reward those that remain loyal to HP, the stakes have been raised for resellers to invest in return.
HP made it clear that in a game with the likes of Dell and IBM as
competitors, it had every intention of winning, branding its channel partners as ‘Masters of the Game’.
Speaking to VARs from 47 countries, HP chief executive Mark Hurd vowed to strip away layers of complexity and make HP a more predictable company for partners to do business with (CRN, 19 September).
“I may be new to working with HP but I’m not new to working with partners. HP is committed to invest in those partners that add value to HP. We want partners that go into incremental markets, partners that are willing to invest and grow with HP – that is what this is all about. We are not just here to talk to partners – we are here to listen. Honest criticism is vital to our success in business,” he said.
“HP is a complex company with a lot of layers, but we are not always predictable. We need to simplify the things we do and want to make HP a simpler company to work in and do business with,” he added.
Hurd told the assembled partners that HP is reducing operating costs to make the firm more competitive and to enable it to invest more in R&D.
“We are going to do a better job of leveraging our sales force and our partners. To make HP a great company we need more than cutting costs and operating efficiency. We are refining our growth strategy to get more simplicity, alignment and execution,” he said, and added that HP is “proud to be known as a company of technologists”.
“It is our future and what differentiates us from the competition. We would rather out-innovate and out-execute the competition. I want HP to be known for three things: creating technology, selling products and being able to service all those products. We will invest in the technology that simplifies IT and work closely with our partners to meet their needs. If we do all this well, then we will be a very successful company,” he said.
However, Hurd issued a veiled warning to partners that they must show commitment to gain benefits.
“It is not a question of whether we need partners. Of course we need partners. That is why we are focusing on programmes and investment in our most loyal partners. If a partner wants to leverage our portfolio, they will find no better friend than HP.
“But if a partner loads up with other products and components, they are not going to find us quite as interested in their business. Loyalty is a two-way street – we tend to be loyal to those that are loyal to us.”
In a move that proved the vendor is taking honesty and openness more seriously, Hurd also made no excuses about HP’s desire to maintain and grow its direct business.
“Our strategy is driven largely by customer choice. To us it is not about either direct or indirect, it is both. We want to grow our direct business and attract customers, but we recognise that we need to be more predictable. However we will not cede business to competitors; if customers want to go direct, they have the choice.”
Jeremy Davies, senior partner at analyst firm Context, said Hurd’s comments represented a “sea change” for HP. “With this new partner approach, I think you are going to see a lot of changes. It was refreshing to hear Hurd say it is a technology company as well. HP has the scale and is willing to invest in R& D.
“The changes HP has made so far have all made sense. HP would be crazy to throw partners away and at last it is realising what an asset it has in the channel, and wants to use these partnerships properly. Don’t expect things to change overnight, things will happen over the next two or three years, but HP is in it for the long haul.”
Figures released by HP at the event proved that partners were central to business. Jim McDonnell, vice president of sales and marketing for HP’s Personal Systems Group, said the channel delivered 11 per cent growth for HP in its third fiscal quarter and represents 60 per cent of total revenue.
The channel plays a vital role in HP’s three main divisions. In total 55 per cent of its $30bn Technology Services Group business is done through resellers, 96 per cent of its $25bn Imaging and Printing Group business is conducted indirectly, and 80 per cent of its $26bn Personal Systems Group business is done through the channel.
Therefore it was no surprise that HP used the event to unveil its new Preferred Partner Programme. After all, the vendor could win prizes for making the most changes to its channel strategy over the past few years. But the message from all HP’s senior executives was that this programme was the real deal and the result of years of hard work since HP merged with Compaq back in 2001.
The programme, designed to help end-users find the right HP partner, is divided into nine specialisations, which span HP’s entire business portfolio. These are high-performance computing, computing systems, datacenter solutions, mobility, e-preferred, imaging and printing, networking, security services, and StorageWorks solutions.
HP said that, although some partners will focus on different specialisations, the majority will qualify for all competency areas and could receive up to 50 per cent extra margin as a result. Benefits on offer include direct contact with HP, predictable compensation, sales and marketing resources, special pricing, early access to roadmaps and recognition as a proven HP partner. They will also get to use the Preferred Partner Programme logo on letterheads and marketing material, but must requalify every year to ensure Preferred Partner status and receive the most up-to-date logo.
Jos Brenkel, vice president Solution Partners Organisation at HP, said the vendor expected to lose some partners as a result.
“We have weighed the risks up carefully, but there is a risk that some partners may question whether they want to continue working with HP. We are really putting the focus on the customer and putting the total customer experience through the channel. Resellers who don’t believe that our brand adds value and sell opportunistically bring it down for everybody else and we don’t need that kind of partner. We need partners that want to invest in the HP brand.”
Brenkel said partners that had already invested significantly in HP, such as those that qualified as Centres of Excellence in the UK, would already have most of the competencies needed to become a Preferred Partner.
“Nobody is wasting any past investment. Inevitably some partners will be skeptical, but it is up to us to prove that our programme is the best in its class. We have already put in four years of investment with our Top Config and Top Value programmes, so we are committed to this,” Brenkel said.
The vendor also launched its Smart Choice Customizer – an online portal it has claimed can turn around customer orders in as little as 24-hours, which HP hopes is another weapon in its fight against Dell.
Using Smart Choice, Preferred Partners can offer HP products at competitive prices, and also set up specific, private customer pages for customised purchasing. The portal also makes use of Top Config, which uses HP’s distribution partners to build bespoke systems.
“Dell has stolen a lot of market share from both us and the channel and that is why we are investing heavily. We want to regain some of those customers back. We think Smart Choice is better than anything we have done before and we will do everything to make it work,” added Eric Cador, senior vice president Personal Systems Group EMEA at HP.
Early channel reaction to HP’s announcements have been positive.
Greg Carlow, managing director of VAR Repton, said: “HP is providing a very significant increase in channel support, in fact it shows a doubling of commitment from HP to its channel. Plus we get additional marketing support on top of that. It does set down the framework of a more harmonious working between resellers and the HP sales teams, which is a good thing. However words are words, and we will have to wait and see what happens.”
Larry Rach, sales director at Preferred Partner ACS-APT, said: “I was pleased with the content and, on a scale of one to 10, would give HP a nine for effort. For the VARs that have been loyal, it is nice to see them reciprocating. The new Preferred Partner Pro-gramme has hit the nail on the head. You can look at the programme at face value and won’t find anything negative with it. It will certainly weed out those partners that are not being professional, and leave only committed partners, which is not a bad thing.”
David Gould, trading director at PC World Business (PCWB), said: “I think HP has got a strong message in terms of commitment to the channel. I do believe that it is honourable. Simplifying its strategy will be very beneficial and the new partner programme is a move in the right direction, but HP will have to police it carefully and deliver on its promises. For me, that will be the measure of success and a reward for loyalty, participation and growth. I look forward to PCWB’s relationship with HP going from strength to strength.”
Gould added the Smart Choice development might cost those that already have a back office system in place in terms of implementation.
“It will be great for those that don’t have a back office system, but for those of us that do, it will require some resources to implement it. However, I think it will help the sales process overall and improve the customer experience, which is most important.”
Andy Dow, commercial director at distributor Westcoast, added: “I think HP has showed an openness, particularly about its direct strategy that has been refreshing. The new partner programme is an improvement on the old Business Partner programme and I think it will bring more value to resellers. It is clear to me that HP wants to engage with partners that have a positive attitude to HP.
“When working with a vendor such as HP, there are three things you want to hear – honesty, sincerity and investment. HP is providing all of these in abundance,” he said.