HP Welcomes Proposals That Target Non-HP Customers

In the ever-tightening economy, Hewlett-Packard sees the path to continued fiscal health and growth running through new customers that have never bought the company’s products. To reach those large swaths of non-HP customers, the vendor is welcoming partnership proposals from solution providers that promise to capture more of that business.

Speaking at the Synnex national distribution conference last week in Charlotte, N.C., HP channel chief Adrian Jones spoke about the large swaths of potential customers—particularly SMBs (small and midsize businesses)—that represent nearly $68 billion in untapped IT spending. 

“We feel that there are still opportunities out there that we’re just not reaching,” says Jones, whose official title is vice president and general manager of HP’s Americas Solution Partners Organization. “We’re trying to go after net-new acquisition and get business that we don’t have today. The large partners and small partners can get to new customers that we’re just not reaching.”

Many vendors are retracting both their direct and indirect sales efforts as the economy slows. Instead of trying to capture new business, many see expanding sales in existing customer accounts as one way to grow revenue and keep costs in check.

HP is taking the opposite tact, instead looking to build its customer base in as many ways as possible. Jones says this was part of the reason behind the controversial alliance with CDW that launched last month. In that deal, HP is funding more than 100 inside call center representatives to target new accounts that have less than 500 seats.

While some have called HP’s deal with the largest direct-market reseller an attempt to revive its failed call center efforts and undermine the SMB channel, Jones defended the alliance by calling it complementary to channel efforts and an example of how solution providers can work with HP on growing business.

“In SMB, we’re looking for co-investment, not just HP putting a bunch of money into the partner. ROI is key. Analytics is [showing] which technical and customer that they’re going after. I don’t want to dilute business; I don’t want the partners to go after the same customers. All of the customers that we’re going after today have never bought HP products,” Jones says.

Jones says CDW approached HP with a business plan that promised to capture more of the unaddressed SMB market. The program, which launched about three weeks ago, targets only customers that have never bought HP products. HP worked with CDW to ensure that the target list does not contain accounts currently serviced by HP resellers, he said. 

“We haven’t encroached on any partners, and there’s no point putting money into something that we would take away from existing investments,” Jones added.

Investment in business and revenue growth is extremely important to HP, now the undisputed leader in the IT vendor community. With the acquisition of EDS completed, the company will boast revenues of nearly $135 billion annually—more than half through channel partners. In early 2006, CEO Mark Hurd laid down the challenge to HP resellers: Force IBM to give up its moniker as the world’s largest technology company. HP and its network of partners did just that in 2007; surpassing IBM in total revenue and relegating Dell to second place in the PC market.

The acquisition of EDS—primarily an enterprise services company—will add another $22 billion to its annual revenue stream. Nevertheless, the company is issuing warnings of weaker-than-expected earnings in 2009 because of the deteriorating global economy and low valuation of the dollar. Jones adds that the HP channel network is under pressure by these same economic conditions.

“We’re doing OK because we’re so diversified, but business is tough and it’s getting tougher to get deals done,” he says. “The large enterprise resellers are struggling because they’re selling into automakers and financial services companies. They’re having a tougher time because of where they play. In the midmarket and SMBs, there are opportunities and solution providers are making money. I wouldn’t say that everyone is doing well, but there are pockets that are doing well.”

HP has traditionally leaned on its printer business for the bulk of its gross revenue and profits. The printer market is flat and analysts anticipate the North American printer hardware market to slip in total sales over the next three years.

HP is continuing to bulk up its software business, particularly through the 2007 acquisition of Mercury Interactive. However, Jones says the immediate opportunity comes from storage and servers—particularly blade devices. The amount of data is doubling every 18 months, driving the already $45 billion storage hardware market to even greater heights.

Jones says new products such as HP’s new SB 600c storage blade server and the recent acquisition of iSCSI SANs and storage virtualization vendor LeftHand Networks are signs of HP’s confidence in taking on storage leaders EMC and IBM.

“Our storage business is outgrowing the market and we still see that as a big bet,” says Jones. “We’re doing more around blade strategy and continue to invest in new storage technologies. We still don’t have our fair share.”