Channel Still Wary of HPBy Pedro Pereira | Posted 2005-03-07 Email Print
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Decision to send 250 direct accounts to channel draws cheers, but wait-and-see attitude is common
One month after Carly Fiorina's departure as chief executive of Hewlett-Packard Co., some HP resellers are welcoming the decision to shift some large accounts from HP's direct-sales group into the channel; other members of HP's enterprise partner group, however, remain guarded about the company's overall channel strategy.
During Fiorina's reign, a common partner complaint was that HP, Palo Alto, Calif., cost the channel millions in sales by selling to some large accounts directly, in an effort to combat direct-sales king Dell Computer Corp, Round Rock, Texas.
In recent weeks HP has signaled its intent to make up some ground with the channel by shifting 250 direct enterprise accounts to partners and downsizing its direct sales force. These steps, along with promises from HP executives that more of the same are on the way, have fostered some optimism, but many partners are taking a wait-and-see approach.
For example, Marlene Brill, president of Digitask in New York, says she has heard HP say the right thing about its channel commitment many times over the years Its actions haven't always followed the rhetoric, however. "It really doesn't matter what they say, it's what they do," she said.
"I couldn't honestly say HP's made a decision to fundamentally change or stick with past behavior," said Keith Bradley, president of distributor Ingram Micro North America, Santa Ana, Calif. If anything, Bradley said, he senses that HP is taking a pause to reconsider all its options.
"What I think HP needs to do is to look at its overall profitability," Bradley said. Other major vendors, including IBM Corp., have concluded that working with distributors and VARs actually increases profits, he said.
As a distributor that doesn't sell directly to end users, part of Ingram Micro's role is to give VARs and solution providers a voice in communicating to HP the message that the vendor should de-emphasize direct sales and commit more of its marketing funds and efforts to channel partners, he said.
Working through two-tier distribution is the most efficient way to reach certain markets, particularly SMB, say channel executives. This is because distributors supply tens of thousands of resellers who are in tune with the needs of small businesses. Setting up an infrastructure that can effectively penetrate that market is costly and daunting for vendors.
"While resellers recognize that HP will continue to sell direct to enterprise accounts, the channel is better equipped to serve the SMB base," said Steve Raymund, chairman and chief executive of distributor Tech Data Corp., Clearwater, Fla. "In this respect, I think resellers would welcome a return to a Hard Deck program that more crisply defines HP's selling rules of engagement with respect to market segments."
Hard Deck, launched in 2001, reserved about 900 large accounts for HP direct sales and gave the remaining corporate sales to resellers. But HP abandoned the strategy in August 2002, saying it wasn't feasible and that it had to boost direct sales to gain market share.
Now the company is making another reversal, announcing last month it is shifting 250 enterprise accounts to partners. For Don Richie, chief executive of integrator Sequel Data Systems, Austin, Texas, this is great news. And his company already has poised itself to take advantage of the enterprise-account shift.
"HP is living up to its commitment," he said. "Everything they said they were going to do, they're doing. Basically, what I'd like to see them do is to continue down the path they're on."
Steve Tepedino, president of Avnet Partner Solutions, the distribution arm of Avnet Inc., Tempe, Ariz., echoed Richie's comments that HP is following through with its channel plans. Avnet is working closely with HP to map out the shift of the enterprise accounts to partners, a process that Tepedino said will last through midsummer.
"It's not easy to move a few hundred direct relationships in an orderly fashion," he said. The shift is an evolution that requires careful planning so that no revenue is lost in the process.
Fueling much of Tepedino's and Richie's optimism is the cast of characters in charge of channel relations at HP. John Thompson, who took over in January as vice president and general manager of HP's solution partners organization, and Jack Novia, who became senior vice president and managing director for the Americas region of HP's enterprise sales unit in August, have proven themselves strong channel advocates, said Tepedino and Richie
Richie is so bullish on HP, in fact, that he has partnered with two other HP enterprise resellers, PKA Technologies of Suffern, N.Y., and San Diego-based Nth Generation to create a separate organization with national reach for large corporate deployments and other projects.
Digitask's Brill also finds comfort in the presence of the strong channel advocates at HP, but she retains a healthy dose of skepticism. "If I got a call from the New York field office to say, 'Why don't you come in and let's plan,' then we would be on the right track," she said.