To put it mildly, it was a surprise to many in the channel and has left HP trying to position and court solution providers that have placed their trust and revenue in the company. What’s more, it has given other vendors the opportunity to seize on the fear, uncertainty and doubt around the future of HP’s PC business.
HP has a huge product portfolio, but one-third of its revenue comes from its Personal Systems Group (PSG), with the channel as the primary driver and influencer of those sales. HP has the largest network of channel partners in the industry and through the years has been able to gain PC market share on the backs of solution providers.
Top brass at HP argue that the HP they want to be -- more heavily invested in a high-margin software and services business -- and the HP they are -- where a sizable portion of business comes from high-volume, low-margin business -- are quite different, and the only way to reconcile this conundrum is to spin off the business.
But the move is a risky one for HP. While the client device market is a low-margin piece, it pulls other product and services, including servers, storage and managed print, among others. Channel partners tell us that they are losing deals selling other HP products because of the uncertainty around PSG.
It’s all about predictability. Simple to say, but perhaps very difficult to execute in light of this news. The reality is the channel needs to bank its future on a company that will support them for the long term. A messy spin-off could take 12 to 18 months with new executives, new rules of engagement and possibly new legal constraints. The moves from the biggest tech company in the market have been anything but consistent since the ouster of former CEO and now Oracle Co-President Mark Hurd.
So this is what needs to happen next: HP needs to do a much better job of communicating with the channel and its customers about what a spin-off could mean for them. HP must realize that it needs the channel more than the channel needs it. The competitors are swooping in and trying to win over solution providers with attractive alternatives.
Dell Chairman and CEO Michael Dell has seized this opportunity and has been reaching out to some of HP’s biggest partners, talking to them directly about their business. Can a tried-and-true HP VAR get on the phone with CEO Leo Apotheker or the board these days? This is an all-too-familiar scenario that has been played out over and over again through the years.
The company also has to fill the channel void created by the promotion of Stephen DiFranco to lead PSG. HP just announced a U.S. channel chief within PSG with the appointment of Mike Parrottino, but it still needs a global channel chief to pull together all of the channel programs, help to thwart any competitive threats, stem losses of other hardware sales, and create a strategy to recruit software VARs as they expand their businesses. Not a small order.
The good news is the channel is key, no matter which direction the company heads. HP’s history has shown that when it makes investments in the channel, it is able to beat competitors and gain market share. Hopefully the lesson won’t be lost on the board and new executive team.
BACKTALK: Kelley Damore is VP, Editorial Director for Everything Channel. You can reach her via e-mail at email@example.com.
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