HP`s Channel Commitment Pays Off

By Pedro Pereira  |  Posted 2008-11-20 Email Print this article Print

HP kept trying to bypass partners during the last economic slowdown, but this time its channel commitment is strong, and the vendor is doing better.

Hewlett-Packard’s announcement this week that it expects to exceed Wall Street expectations in the fourth quarter offers a beacon of hope in a decisively grim economic environment.

The vendor on Nov. 18 disclosed preliminary fourth quarter results indicating a 19 percent revenue jump and a 4 percent earnings increase from the year-ago quarter. The estimated revenue of $33.6 million beat Wall Street’s expectations of $33.1 million, while the expected earnings of $1.03 per share is slightly above analysts’ projection of $1 per share.

For solution providers, the computing giant’s financial performance is more than a bit of good news, and not just because it translates to sales of products and services. Arguably more important, from a wider perspective, positive results from HP at a time when other IT vendors struggle with softening demand come as validation of the channel model itself.

Too big a stretch, you say?

Then consider what HP was doing through the last economic recession, which followed the dot-com bubble and the Y2K overhaul. At the time, HP was doing all it could to circumvent the channel through direct sales in misguided attempts to grab market share. Casting an envious eye on Round Rock, HP seemed intent on outdoing Dell at the direct-sales game. As we all know, the strategy didn’t exactly pay off, and as of a year ago, Dell itself has turned to the channel to increase profitability and market share.

Thankfully for solution providers, many of which had turned their backs on the vendor in frustration, HP corrected its course in the last three years after Mark Hurd took over as CEO, replacing Carly Fiorina.

Despite a misstep or two, Hurd has proven a friend to the channel who takes the time to sound out partners and customers. Under his leadership, commitment to solution providers has only gotten deeper, and his words to partners don’t elicit the level of suspicion and derision that his predecessor’s had provoked.

Clearly other factors have played into the vendor’s success, and those include product mix and successful acquisitions, but HP’s attitude toward the channel cannot be underestimated.

Not only has it contributed to the vendor’s current relative position of stability, it should also serve as a model to other vendors. That goes especially for vendors that, though they might say the right things, haven’t entirely embraced the channel as a reliable and profitable sales and service partner.

Because what HP has proved with is reinvigorated channel commitment in the last three years is that a well-run channel program that takes into account partners’ needs, in addition to those of the vendor, is a recipe for success.

As the economy continues to slide, some vendors might be tempted to fight the slump by driving up direct business and cannibalizing channel sales. They should think twice. Hell, think thrice. Any short-term gains from such a misguided move are sure to be overshadowed by deleterious effects in the long run.

Sure, the channel is forgiving, as solution providers have demonstrated by embracing Dell’s channel program, but the channel doesn’t forget. With HP, there was a lot of residual goodwill from pre-Fiorina days when the vendor could do no wrong in the channel. So when HP started to change its wayward ways, plenty of solution providers were willing to give the company another chance.

Now, as the IT industry navigates another downturn, at least solution providers don’t have the added burden of wondering whether one of their most important vendors is about to undermine. Hopefully, that won’t change.

Pedro Pereira is a contributing editor for Channel Insider.




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