HP's Gilroy Sees Services as Channel's FutureBy Channel Insider Staff | Posted 2005-09-13 Email Print
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In an interview with Ziff Davis Internet, HP's channel czar Kevin Gilroy, who is leaving the company after 24 years, offers his thoughts on where the channel is headed.
In his 24-year career at Hewlett-Packard Co., Kevin Gilroy has served a number of masters, but none so well or notably as during his time as vice president of commercial channels. He stepped down from that role last year, and Sept. 30 he leaves the company all together. For 24 years Gilroy has had a unique vantage from which to watch the channel develop and progress toward the future. Gilroy sat down with Ziff Davis Internet's John Hazard to share his thoughts on the channel and its future.
How has the channel changed in the past five years?
The ecosystem has evolved to adjust to new market dynamics. In the last few years you've seen VARs really morph into something else. You used to have channel partners that you could fit in boxes. They were a VAR, an ISV, an application developer, etc. Now you have seen the VAR model morph, and the ecosystem is not as clear. Many do a lot of those things now. They're software resellers, they're hardware resellers, they're a services practice. You can't force them into the usual boxes.
What is driving VARs out of those boxes?
Generally what drives VARs is they know how to sniff out opportunity. They know what the customers' needs are. They are closer to the customer, more intimate, and they can sniff out the opportunity where it is available. Based on that ability and their experience they're able to build out and add value for the customer.
On the whole VARs are more nimble than any industry I have ever seen. They adjust extremely quickly.
I think the ability to offer services started the VARs morphing into something else. They began mixing and matching between hardware, software and service sales. In the '80s it was all hardware; in the '90s it was all software. Now it is services, and they are pulling the hardware sales.
There are service opportunities are at all levels. The power of SMB in the market to not only take a major role, but be the dominant marketplace has created great opportunity for services. The main thing driving that is just their sheer number. Most job creation is happening there, and many SMBs are popping up in developing economiesIndia, China, Brazil, Russia, all coming out of SMB.
The other factor driving the services is that IT has moved from being an appendage at these companies to the spinal cord. You used to have an auto body shop, and they used computers to print their invoices. Now you have them using digital photography to submit claims to the insurance companies; they're ordering parts; finding prices. The IT system is now a spinal cord. They can still work on cars, but their parts may not be coming in; their claims may not be filed.
It's becoming more and more important to them to be up and running. A manufacturer can ship a PC, but they can't solve a solution for a five-person auto body shop, a two-person law firm or a 10-person accounting firm. That is the purview of the VARs.
The services sector is a wealth of opportunity. Companies need to mitigate downtime risk. With IT becoming the spinal cord, the SMB needs IT up and running all the time, free from virus, worms and anything that causes downtime. The SMB may not be ready to regularly say $700 is OK to pay for service calls, so you are going to have to see some development on the business model to make it available and affordable.
Create a win-win situation and a balanced scorecard for everyone, and everyone wins.
How has the relationship between the vendor and the VAR developed?
The manufacturer still makes the product, but manufacturer needs to improve the level of predictability in order for VARs to build practices around whatever sector or vertical they choose. They need to know how the vendor is going to market; they need to know that rebates are predictable; they need to be empathetic to the VARs' needs and the economics around selling the product.
They need predictability and consistency of leadership from the channel director up to the CEO. Every time you change the leadership you change the philosophy, and it's frustrating for [VARs].
They have to be able to see a program horizon that is reasonable. Otherwise you have 80 balls in the air wondering which to optimize, and none get done. Those manufacturers who have been growing and changing have to stick on strategy. It takes discipline.
What pressures are driving the relationship between VARs and vendors?
Economic changes are affecting the relationship. Now competitors come from around world. The customer has price power.
The VARs and vendors need to be mutually empathetic. You can't say, "I don't care about the vendor's profit, as long as I make mine." It requires trust.
What role does the channel executive play in that relationship?
As channel director you walk a fine line. You are certainly an advocate for the channel, but I work for HP and I understand that. You get pressure from both sides, and there are misconceptions on both ends. What I try to do as channel manager is have fact-based conversations. You can't make global comments, like "The channel isn't economically profitable" or "All manufacturers care about is going direct to market." Those aren't true statements. The more facts you bring to the conversation, the more emotion you take out of it and the better the relationship.
Where does HP stand with its channel?
HP cares very much about the channel. Sixty-six percent of HP's sales went through the channel. I think HP understands the power of the channel. They have two very powerful channel executives in place. And Mark Hurd is supportive of the channel. They're under solid leadership.
The truth is HP is supportive. VARs need to be empathetic to the needs that HP has. They have balance scorecards just like you. The more you make it an empathetic joint, the better it will be.
I say stick with HP, it's a major player. SMB is where growth is coming from, and I would say a lot of companies can do a good job for them, and HP is one of them. They are the market leader.
What pitfalls lie ahead for VARs?
There will always be disruptions, but I see more upside opportunity than threats. One thing VARs need to be doing is to continue to evolve management teams. They need to be disciplined enough to do that. Sales techniques of today may not be right for SMB three to four years from now. Be disciplined in your training. People investment is key. Where there's investment in people there is a [positive] result. Planning, project management. Sales techniques, financial acumen. Where you see disciplined investment in people you see sustained growth. Unfortunately, the first thing that often gets cut is the people development.
What areas of opportunity are presenting themselves to channel partners?
VOIP [voice over IP] is going to be huge. It is an extremely stable platform, and it is looking better over time.