The financial markets liked what they saw when Hewlett-Packard Co. announced on Tuesday it was naming NCR Corp. veteran Mark Hurd as president and CEO, sending the company’s laggard stock up more than 10 percent.
But the channel’s reaction to the appointment was considerably more muted. HP’s channel partners are not familiar with Hurd, who has spent 25 years at NCR, the last two as president and CEO.
The lack of familiarity itself is of concern to channel partners, many of whom were hoping HP would give the top job to someone they know and trust, Vyomesh “VJ” Joshi, the executive vice president of HP’s Imaging and Personal Systems Group. Joshi has worked closely with partners for years.
But lack of familiarity can be overcome quickly enough, so long as Hurd makes contact with key channel players to share his vision and learn the partners’ needs.
Partners will be looking for concrete signs that Hurd wants to make a strong commitment to the channel. Many questioned this commitment while Carly Fiorina was chairman and CEO, when the Palo Alto,Calif.-based company at times seemed obsessed with boosting direct-sales efforts to combat direct-sales king Dell Inc. Fiorina left two months ago.
Channel players strongly believe that HP’s best chance at regaining the market share it has lost to Dell is by working with the channel.
No one expects HP to eliminate direct sales altogether, but partners want the company to discourage its direct-sales force from targeting markets where VARs and integrators do business, particularly the SMB space.
SMB is a vast, diverse market that vendors target constantly, but with mixed results. In recent months a host of vendors has rolled out SMB channel initiatives with an eye to getting a piece of a market, which according to New York-based AMI Partners Inc., will spend an estimated $163 billion in IT purchases this year.
HP would do well to move all of its SMB-targeted sales to VARs and solution providers, the people who best understand this market. Small, local companies prefer to do business with other local companies, and VARs are best equipped to assess their local customers’ IT needs and respond promptly to service calls.
Jane Cage, a partner at Heartland Technology Solutions, Joplin, Mo., said her company occasionally runs up against HP’s direct sales force when trying to make a deal. And even though HP has resolved the conflict in Heartland’s favor in these situations, Cage points out the customers her company serves are among the smallest in the SMB space.
This means HP is reaching its direct-sales tentacles into the smallest of small business. And that should change.
Steve Raymund, chairman and CEO of distributor Tech Data Corp., says HP ought to return to the approach it tried with Hard Deck, a program launched in 2001 that reserved about 900 large accounts for HP direct sales and gave the remaining corporate sales to resellers. HP abandoned the strategy in August 2002, saying it had to boost direct sales to gain market share.
Keith Bradley, president of distributor Ingram Micro North America, Santa Ana, Calif., has been making the case that working with distributors and VARs is more profitable than selling direct.
If given the chance, Bradley will surely make that case to Hurd.
Some channel players have grown more optimistic lately in light of several moves HP made to strengthen channel ties. Those include a plan to shift 250 direct enterprise accounts to partners and direct-sales force cuts.
If Hurd makes a commitment to continue on this path, he’s off to a good start. If he makes a bold move to strengthen the company’s channel commitment, perhaps something along the lines of what Raymund suggests, he is off to a great start.
Getting a positive reaction from Wall Street has immediate measurable benefits. But regaining the channel’s trust will have a lasting effect that may well contribute to the HP’s profitability and market share position.