As the still relatively new captain of Hewlett-Packard, Mark Hurd is definitely making his presence felt in a positive way. For the most part, HP is in dramatically better shape than it was a year ago and the significant changes that HP has made in its approach to the channel are being generally well received by its partners.
But even so, Hurd still has a tendency to address the channel in terms of what solution providers can do for HP rather than in thinking about things in terms of what HP can do for its solution providers.
Case in point is Hurd’s fixation on increasing the attach rates on the number of HP products sold in any given deal. For the CEO of HP, that’s an admirable goal. But there aren’t all that many solution providers out there telling customers that they can’t buy an HP printer with the server they just purchased.
Click here to read about HP’s plans to boost channel spending and raise margins.
The two things that HP really needs to do to step up the amount of HP products being sold in the channel are, first, to come to market more aggressively with application partners to create total solutions that a solution provider can lead with, and then secondly to reduce the complexity of dealing with HP.
Hurd knows these are issues and is committed to improving HP on both counts, but while leading with a chant about increasing attach rates may play well within HP, it kind of misses the point for solution providers.
Instead, solution providers would much rather hear about all the new solutions that HP is developing with its application partners. And when you sell the application, that’s when you get to pull all the servers, storage, clients and network gear along with it. But at the Partner conference the week of June 19, there was nary an application partner to be found.
And it’s not like HP doesn’t know how to do this. HP has seen some great success by partnering with SAP in the channel. But that’s only one example. What HP needs is to have hundreds of application partners working closely with its solution provider partners.
The next bit of business on the agenda should be reducing all the management overhead surrounding the HP product line. Right now, any kind of deal involving HP PCs, servers, network hardware, services and OpenView software requires a small army of HP people to approve.
Most solution providers only have enough time and money to deal with maybe two or three of the bureaucracies that surround each HP product line. And heaven forbid any special pricing situation comes up, because it still takes the equivalent of a United Nations resolution to resolve, because nobody in the deal wants to really give up a few points on margin even if the whole deal could be worth a lot more if, say, server pricing were little bit lower.
Of course, because pricing is never in touch with actual street prices, every deal becomes an adventure in special pricing negotiations that is bound to deter even the most committed HP partner.
Hurd knows this as well, even going so far as to point out that if HP were to, say, make $8 billion on sales of $91 billion in 2006, that would mean that a staggering $83 billion in costs needed to be incurred in order to generate $8 billion in profit.
HP is already at work on reducing its layers of management, while simultaneously increasing its direct sales force head count by hundreds of people, because HP sees 2.5 times more revenue from accounts that HP touches than those it doesn’t.
But clearly the company has a long way to go in terms of just making itself simpler to do business with, and arguably a concerted effort here will do a lot more for increasing HP attach rates than any additional head count in the direct sales force or any additional margin incentives around certain products ever could.
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Specifically, a much leaner organization would probably find it a lot easier to share information across its different groups so it could then more easily discover accounts that, for example, may have a lot of HP servers installed but no ProCurve switches or OpenView management software. To his credit, Hurd is working on streamlining the IT systems within HP to make it easier to get at this data, but it’s not like the data doesn’t already exist. It’s just difficult to access and correlate.
That means that partners shouldn’t have to wait for some new HP business applications to get first built, then deployed and then debugged before getting access to that kind of information. If that’s what HP is waiting for, then we’ll be late into 2007 before anybody sees any real benefit from large-scale account management applications that are still being built today.
As Hurd noted during his speech at HP Partners conference, he is committed to doing everything that is short of illegal or unethical to help solution providers increase attach rates. That’s a noble sentiment and Hurd deserves a lot of credit for bring the HP bow about and moving the company in a positive direction. But rather than waiting for the ship to eventually pick up momentum, now is the time to more aggressively leverage the solid work that has been done over the past year to really start moving HP full steam ahead at a time when many of its major rivals are just starting to stall.
Michael Vizard is editorial director of Ziff Davis Media’s Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.