HP's Cost-Cutting Measures Don't Scare Partners

HP's announcement earlier this week centered on creating a leaner, meaner company. To do that, CEO Mark Hurd announced that the Palo Alto, Calif., company will cut about 10 percent of its full-time staff, as well as eliminate redundancies caused by its previous merger with Compaq Computer Corp.

Many partners, like Ingram Micro., a value-added distributor of HP products based in Santa Ana, Calif., weren't surprised by the announcement and don't believe that HP's channel programs or focus will change dramatically due to the reduction in force. Executives at Ingram Micro, for example, believe that HP will still count heavily on enterprise partners to grow its business.

"This move shouldn't surprise the channel. Back in February at the HP Partner event, the company laid out three pillars of focus: become easier to do business with, build a world-class cost structure, and unify efforts to become a stronger competitor and partner," said Paul Bay, senior vice president of vendor management for Ingram Micro North America. "Clearly, [Tuesday's] announcement ties back to those statements."

One reason for the general optimism is Hurd's insistence that most layoffs won't take place at the sales layer, but in individual business units and support functions like finance, human resources and information technology.

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"If you look at where they are going to cut, it's not in sales and marketing, it's in back office operations. It looks like they're not going to mess with the feet on the street," said Eileen Gibson, vice president of marketing for Avnet Technology Solutions, Americas. "An inordinate amount of their business goes through the channel, so I'd be greatly surprised if they were going to mess with something that's already working."

Refusal to sacrifice the company's sales force is a good move and shows that Hurd, the newly minted CEO, is on the right track, said Tim Joyce, president and CEO of Roundstone Systems Corp., a solution provider and HP partner based in Alameda, Calif.

In fact, Joyce believes Hurd's comments were actually very encouraging to HP-focused partners.

"It appeared as if he was going to put a different value on partners he could trust to not only lead with HP but stay with HP," he said. "I took that to mean that they believe that the approach of partners that are really focused on HP are more closely aligned with them, so they will make sure to 'double-down' on those partners going forward, to use Mark Hurd's words."

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Bay agreed, noting that although it's too early to determine fully how the announcements will impact HP's partners, he doesn't expect any major changes.

"We don't expect any sweeping changes, but we expect more emphasis on channel programs that will help VARs sell HP solutions," he said. "Like any vendor, HP is working to better support those partners that support them and will further reward them for their commitment."

All in all, many partners seem encouraged by Hurd's comments and believe that HP's partners will profit in the long term.

"The moves Mark Hurd made should be very encouraging to the channel: He's a decisive leader, he seems to have a good handle on HP's problems after just a short time on the job, he apparently views sales as an important part of the company's business, and he views partners that are focused on HP as allies," Joyce said.

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