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HP’s Channel Services Business Outpaces Direct Sales

Hewlett-Packard is growing its services business through the channel four times faster than direct sales, one HP executive said. Channel partners selling services such as individual product Care Pack Services, more comprehensive Maintenance Contracts and Managed Services now account for 40 percent of new business for the HP’s Technology Solutions Group, which owns the vendor’s […]

Written By: John Hazard

Jun 21, 2006

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Hewlett-Packard is growing its services business through the channel four times faster than direct sales, one HP executive said.

Channel partners selling services such as individual product Care Pack Services, more comprehensive Maintenance Contracts and Managed Services now account for 40 percent of new business for the HP’s Technology Solutions Group, which owns the vendor’s services practice, said Jo Ann Redding, vice president of TSG Services Sales. The channel represented a less significant portion of renewals, but it was also outpacing direct resources, she said.

Channel companies are coming to the idea of simple-to-resell service packages for multiple vendors that create recurring revenue streams, but they remain hampered by awareness and stumbling blocks in the sales cycle, such as custom configurations needed for most customers.

“There is a focus on services in the channel,” Redding said. “They’re not making money selling boxes anymore. They are focused on growing attach [rates]—sell a box and sell a service package.”

It is also a recognition of incentives, prices and programs HP has thrown at the channel to encourage service sales, but the practice leaves room for improvement, she said.

“The business is very healthy, but it could be healthier,” Redding said. “Packages are hard to sell. You have a packaged SKU built for six to10 units, but the customer wants only six.”

“It isn’t always price-fix,” she said. “Most service packages are custom quotes. You can’t anticipate every configuration at every level and you can’t build a SKU around that.”

That difficulty in providing a repeatable quote system proves difficult for some partners.

HP is making strides, Redding said, to improve its ability to deliver quotes in a timely fashion. Currently, the pricing model is for internal use only, but plans are underway to put a quote generator in the hands of partners in the future, Redding said.

Sales of HP’s varied Managed Services portfolio, such as remote server management and SMB Smart Services, a comprehensive small and midsize business solution, were also growing above the industry standard, Redding said, but were weighed down by market awareness.

“It’s not a problem with the price points; not a problem in trained partners,” she said. “We could be doing a much better job of letting customers know what we have to offer, so that they are asking for it.”

But advertising dollars have been limited, especially in the SMB space, where the MSP model is so powerful, Redding said. It was an issue of prioritizing and allocating budgets and the lack of an SMB business unit, eliminated last year with the rest of the Customer Solutions Group, which might otherwise have served as an advocate for more marketing.

Most of the marketing for Managed Services funnels through partners, she said.

HP’s Channel Services Business Outpaces Direct Sales

John Hazard

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