HP's Future Just Got Brighter

By Pedro Pereira  |  Posted 2005-11-09 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: By reaffirming its channel commitment, HP just positioned itself better to compete with Dell and Lenovo.

Sometimes a vendor makes a move that indisputably makes so much sense, one has to wonder why nobody thought of it before.

Such is not the case with Hewlett-Packard's decision to redirect its direct sales organization in Colorado to a partner-supporting role. Partners for years had been clamoring for the Palo Alto, Calif.-based vendor to make this very move and clearly define the rules of customer engagement.

At long last, the decision has come. HP is discontinuing its practice of courting end users with its direct sales force, often luring customers away from partners, except for a set of "named accounts" the vendor will retain as direct customers.

The move, while overdue, couldn't have come at a better time. Dell's direct-selling model is showing real signs of weakness, which come as an indication of what channel advocates have known a long time: While on the surface a direct-selling approach may appear efficient and affordable, it simply cannot compete long-term with the channel's well-honed apparatus.

Dell has warned its third-quarter results likely will come in at the low end of forecasts because of disappointing sales to U.S. consumers and in the United Kingdom.

One quarter's results do not a company break, but Dell faces some tough challenges—a newly reenergized HP channel and stiff competition from Lenovo International.

Purchase, N.Y.-based Lenovo, for one, is showing no mercy to the competition. The ink had barely dried from closing the acquisition of IBM's PC business when the vendor started making announcements about low-priced machines aimed at the typical Dell buyer. Last week, Lenovo turned up the pressure by agreeing to sell the wildly popular ThinkPad line through Office Depot.

While Lenovo aims to compete with HP as well, the company's moves may help HP. For one thing, Lenovo hardly has missed a beat as it picked up the IBM PC business, even strengthening its commitment to channel partners. So far the company's sole misstep was an inventory shortage of some models last summer.

By performing well and reaffirming its channel commitment, Lenovo may have contributed to HP's decision to curtail direct sales. Add Dell's floundering into the mix and it is easy to see the wisdom in HP's decision.

Click here to read more about HP's changes to its channel strategy.

For years HP has been trying to out-Dell Dell on the direct-selling front—a strategy that transformed the vendor from channel darling to ogre. Some partners grew so frustrated with HP's direct-sales obsession that they abandoned the brand altogether in favor of IBM, which in the years leading up to the divestment of the PC business, had made tremendous strides in supporting its channel partners.

No doubt a momentous decision such as the one HP just made doesn't happen overnight, but it doesn't happen in a vacuum either. The Lenovo and Dell factors surely played a role in the timing.

After all, it was only a couple of months ago that HP CEO Mark Hurd was making statements that left partners wondering if the company would ever correct its channel strategy.

Having reaffirmed its channel commitment in a very meaningful way, HP now will find out for itself that trying to copy Dell hasn't been the best strategy. Dell has little to offer aside from the lure of low-priced machines, while HP and Lenovo offer not only product but also the ability to leverage the channel's massive infrastructure to meet customers' specific needs at the most granular level.

Kudos to HP for making the right move.

Pedro Pereira is a contributing editor for The Channel Insider. He covered the channel from 1996 to 2001, took a break, and now he's back. He can be reached at ppereira@ziffdavis.com.

 
 
 
 
 
 
 
 
 
























 
 
 
 
 
 

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