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U.S. small
and midsized businesses spend more than $57 billion a year on IT goods and
services, of which Hewlett-Packard owns a 20 percent market share. The key to
increasing that share, says Meaghan Kelly, HP’s vice president of Channel Sales
Development & Strategies, is solution providers focused on small business.

At this week’s HP Americas Partner Conference, Kelly announced a temporary
lowering of the bar to the HP SMB Elite program. For the next four months,
solution providers that produce at least $250,000 in annual SMB sales with HP
will qualify for the program. After Sept. 1, the entry requirement will revert
to $500,000 in annual HP SMB sales.

Sales volume isn’t the only requirement for this program. Solution providers
also must complete two sales and technical training courses, which are provided
gratis by HP through Web-based resources.

“The actual cost of entry is zero, except for time in training, and all the
sales training is online,” says Kelly, vice president of HP’s channel sales
development and strategies.

It’s a pretty good deal, considering that once a solution provider is in the
Elite program, they will gain access to new products, market development funds,
sales, and technical support and special pricing.

But there is a catch. Solution providers entering the program during this
promotional window will have 12 months to increase their HP SMB sales to no
less than $500,000. Those that don’t surpass that mark will run the risk of
being tossed from the program. Privately, some HP executives say they won’t
disqualify solution providers from the program so long as they’re showing substantial,
positive growth.

But what does it take to build substantial or even moderate growth? What
does it take to become a true specialist in a technology, vertical practice or
market segmentation?

Vendors such as Symantec, Oracle, IBM,
Dell and Microsoft have announced or are planning to announce specialty
programs in which their partners can earn access to special initiatives,
advanced products, services opportunities and support if—and only if—they
attain certain certifications and status. The benefits beyond what the vendors
provide in support and special pricing, they say, is that solution providers
will differentiate themselves from peers and make it easier for end users to
select providers for their specific needs.

As theories go, specialization is a good one. Everything the vendors say
about specialization is true. If you look across the channel community, you’ll
find numerous solution and service providers that are laser focused on a
particular technology or market segment. Focus gives them the means to discriminate
against unprofitable opportunities, stick to a business and growth plan, and
deliver quality, expert services.

Growth comes at a cost, and that’s the hidden secret within these
specialization initiatives. Solution providers choosing to participate are
committing to growing their business and, more specifically, the unit sale of
the associated vendors. Achieving growth will come with cost in terms of
training staff, acquiring new sales talent and product, developing new
customers and markets, and fulfilling business. These are not small ticket
items.

When Symantec turned over its professional consultative services to channel
partners earlier this month, Americas
channel executive Randy Cochran was explicit in saying that only a fraction of
its partner community had the resources and capacity to provide these services.
And, he added, even they would have to invest in new sales and engineering
resources to take full advantage of the market opportunities. Adding fresh
sales and engineering talent requires two things: time and money—time to find,
hire and onboard the talent, and money to pay for it. By some estimates, new
hires such as these cost solution providers as much as $50,000 to $100,000
before the first dollar in revenue is produced.

In the case of the HP SMB Elite program, HP is asking participating solution
providers that come in over the lower bar to basically double their SMB
revenues in one year’s time. A quarter-million dollars doesn’t sound like a lot
of money, unless that’s the totality of what you’re generating in sales today.
Undoubtedly, SMB-focused solution providers doing $250,000 in HP sales today
would be doubling down already if it were an easy task.

Something vendors rarely talk about in specialty programs is the built-in
loyalty—or as some would say, dependence— they create. Many solution providers
carry multiple, competing vendors in their product portfolio. If solution
providers can’t scale their resources to build sales volume to meet program
requirements, they must shift resources and attention away from other vendor
products. Oftentimes, this results in a growth in unit sales for the
specialization vendor, but doesn’t help the solution provider grow his
business. In fact, it makes the solution provider more dependent on the single-source
vendor.

Solution providers considering or being prompted by vendors to “specialize”
should ask themselves the following questions before jumping in:

  • What is the level of
    investment for achieving performance expectations?
  • How many new salespeople,
    technical or engineering resources are needed to meet expectations?
  • Will the existing customer
    base provide the needed sales volume?
  • Where will new sales leads
    and customers come from?
  • What are the products that
    will sell best and fastest?
  • Do the program benefits
    outweigh the investment requirements?
  • Can the sales volume be
    sustained in the long term?
  • Will one vendor
    specialization hurt relationships with competing vendors?
  • Will the specialization
    produce enough of a profit to make it worthwhile?

Specialization does help solution providers differentiate themselves from
the competition and define their value proposition to end-user customers. The
benefits provided through vendor specialization programs help solution
providers through support and special pricing. But solution providers must be
aware of the hidden costs—direct and indirect—that comes from racing into these
programs.

LAWRENCE M.
WALSH
is a vice president and market expert specializing in security
and channels at Ziff Davis
Enterprise.
His blog, Secure Channel, follows security technologies, vendors and trends in
the channel. You can reach him at lawrence.walsh@ziffdavisenterprise.com;
and follow him on Facebook
and Twitter.