Hewlett-Packard CEO Meg Whitman sat down with CRN Senior Vice President, Editorial Director, Kelley Damore and West Coast Bureau Chief Kevin McLaughlin last month at the company's headquarters in Palo Alto, Calif., to discuss HP's channel plans, product portfolio, and strategy after a tumultuous 2012. Here is the transcript of their discussion.
CRN: HP sales through partners are down, 30 percent to 40 percent in some cases. Your partners want to know what HP is doing to make the company relevant to their business.
Whitman: We're doing three things: First is product, second is how they get paid, and third is simplicity of doing business with HP.
I think we have done a tremendous amount of work on bringing great new product to market. If we don't have terrific products, partners are going to have a tough time selling them. For example, 3Par, the new midtier storage, and HP Networking, which is growing very well. ProLiant Gen 8 servers, Moonshot servers, new mobility products, the Ink In The Office initiative, and new multifunction printers. So I think we've done a lot of good work on the product.
At our Discover event in Germany in December, we had 30 percent more customers and partners than a year ago. The response to the product was great.
Second thing is partner programs -- how they get paid. I think what has happened here, over more than just a year, is that there have been a number of changes to how partners get paid. And there has not been as much transparency about what you have to do to get paid. So, we have made a commitment to get a great partner program out there -- we're going to be solidifying that at the GPC [HP Global Partner Conference]. Then we're not going to change it -- we are going to lock and load so that partners can have certainty around how they get paid.
Thirdly, we have to be easier to do business with. And we are taking big steps to simplify HP. Part of what we did, which I think the channel will appreciate over time, is create a channel organization dedicated to PPS [Printers and Personal Systems], and a channel organization dedicated to EG [Enterprise Group]. These are run by some of the best channel people in the business. Jos Brenkel [senior vice president, Worldwide Sales and Project Management Office, PPS] is one of the best in the business, and Jesse Chavez [vice president, Worldwide Channel Sales and Alliances, Enterprise Group] is very good as well.
If you are both a PPS and EG partner, and a lot of partners are, you will have two partner leads to coordinate with. But this is going to make it easier to do business with us than it was when we had five different business units, each with their own different set of strategies and products.
CRN: There is a different culture in EG than PPS. Partners are telling us they are seeing aggressive behavior from HP sales reps, including attempts to take accounts direct. What would be the consequence of someone doing this in the future?
Whitman: They won't be working with us any longer. We don't have a lot of tolerance for this.
There will always be edge cases, where reasonable people can disagree, but the fact is, we are committed to the channel. If you are scooping a partner deal that you have no business having your fingers in, at all, then we will take care of that. It's not appropriate.
CRN: You have talked about making bigger R&D investments. What sort of investment are you making specifically to the channel?
Whitman: There are a number of things. First, we reorganized our company around EG and PPS and have hired a whole new set of leaders on both sides of the aisle. From Stephen DiFranco to Jesse Chavez to Jos Brenkel, we have hired a whole new lineup of sales executives.
We have strengthened the ranks of the partner business manager. If you're someone who buys from both sides of the house, you'll end up with two PBMs [Partner Business Managers], which is actually a good thing for you.
We are also investing in our own internal systems to make it easier to do business with us. And probably the biggest investment there is Salesforce.com. We have the ability to put partners on Salesforce.com if they would like to be there. And we think over time this is a very interesting way to 'loop in' our partners so they have the same information and data that we do.
Lastly, we spend about $500 million with the channel around MDF and helping partners go to market. Those numbers are intact, and I think they are even up in the 2013 budget.
We totally are committed to the channel. We recognize that things weren't perfect in 2012, and maybe even in 2011, and we are working hard to make things right. This means better compensation, product and clarity around whose deal is whose.
CRN: At GPC last year you talked about bringing the swagger back to HP and that message resonated very well. This year, given all the turmoil in HP has gone through, you might be facing a different sort of response. What's your GPC message going to be this year and how will it differ from last year?
Whitman: I think have a lot more to talk about on product than I did at this time last year. We didn't have visibility into a lot of this. Many of these products were in flight, but frankly we have accelerated these products, and accelerated the R&D dollars -- for example, Ultrabooks and the ElitePad 900 tablet. So I think I will be able to talk with a lot more credibility about the product than I did a year ago.
We're going to talk a lot more about how partners get paid, and quote some specifics, than we did a year ago.
We'll talk more about HP's overall strategy. Last year, it was early enough for me to know that we were committed to the hardware business -- remember, I said we have to stand tall and be proud that we are an infrastructure company. But now, we'll be able to talk a lot more about the company strategy, and how the piece products fit together.
I think the employees believe [in the strategy], and I'm not sure they believed a year ago. Listen, I was the third CEO in three years. If I'd been an employee, I'm not sure I would have believed. You can just feel it in the hallways. People are pretty energized.
CRN: With all the talk on Wall Street about why HP should be broken up, what are you doing to maintain employee morale?
Whitman: You would be well served to talk to our employees. I could tell you, but the people who work with me can tell you better. I think we have created a vision that people believe in. They want to be part of something that is bigger than themselves; they want to be part of the renaissance of one of the great storied technology companies. And they're pretty psyched up about that.
I would say that we've done a good job of communicating to our employees, in a very transparent way, about what the strengths are and what the challenges are. Also, what the time frame is going to be and how we're going to get all this done. But if you asked people here, I bet you'd find that eight out of 10, maybe nine out of 10, will say they feel pretty good.
Someone said to me the other day, 'I feel more excited about HP with the stock price at $17 than when it was at $40'-- as sort of ironic as that is.
CRN: What do you think HP will look like in five years as a result of the transformation and your leadership?
Whitman: I believe we will be recognized for having brought HP back to industry leadership. I think we will have made a big mark in converged infrastructure, will be widely recognized for being a leader in cloud -- and that is private cloud, managed cloud, services, public cloud or how they all fit together. I think we will be recognized as a leader in that area. We're making a lot of investments and I feel pretty good about where we are there.
I think we will be also be recognized for having kept a terrific printer franchise on the rails. Someone said to me the other day, 'I think printing is dead.' I said, 'OK, well, just watch us.' I don't think printing is going away. I don't know if it's a 10 percent grower, but as a business, people want to print every day.
Our whole Web-enabled printer network is interesting; we'll have a network of 30 million printers doing things that you can't do today.
And we'll be widely recognized for having a very strong software suite, anchored in hybrid cloud, big data analytics and security. And you'll see that we made a play for mobility, which is something we have to do for our PSG [Personal Systems Group] business.
CRN: Speaking of mobility, HP has had a bit of a rebirth -- you are back in the tablet game with the ElitePad and there's a smartphone on the way. Is there any remaining talent from the webOS team that you are utilizing going forward?
Whitman: My first choice when I am beefing up an area at HP is to go find the talent inside HP. And let me tell you, there is immense talent at HP, talent that may have been overlooked before. I like to bet on people for whom it may be a stretch job because they rarely let you down.
When we feel there is someone outside, then we will go outside, as we did with Alberto Torres, head of the mobility unit.
When I got here, at the director level and above we were hiring the majority from outside the company. That has completely flipped on its head, and I think that's a really good thing for HP. Say what you will about this company, I will tell you the people here are terrific. And the innovation capability, and ability and desire for HP to win, is undiminished despite everything that has happened.
CRN: You're clearly going to have some challenges moving Autonomy forward given all the legal issues. How do you plan to make the case for Autonomy in the broader enterprise?
Whitman: We are still very optimistic about Autonomy as a business; it just happens to be smaller and less profitable than we originally had been led to believe [laughs]. But we like big data analytics, we like [the] meaning-based compute products they have. So we just have to build that out. It is like taking a startup to a grown-up, as I have said before.
With Autonomy, we have a legal and compliance business that I don't think is anywhere near saturation. We have a marketing business which is at the earliest stages. I'm not sure we need to move beyond the businesses we're in -- I think there's a lot of growth left in them. We just hired 50 engineers at Autonomy, and we will see where we take this engine over time. But if we didn't add another product for another two years, there's a ton a growth in the products that we have.
CRN: Some channel partners have told us that HP was far more strategic to them five years ago than it is today. They have quietly shifted some investment to Cisco, VMware and EMC as a result. What do you say to them to bring them back into the fold?
Whitman: Maybe I'm being too simplistic but I think this is all about innovation and the product. Because what the channel wants is great product that their customers want. So I think when people are saying that to you, what they mean is that competitors' products are more relevant to customers than ours. We've got to get product that is more relevant than our competitors' to customers, so that it's easier to sell, the value proposition is better and it lets their customers do things they could not do before.
CRN: Partners are also talking about a drop in MDF, incentive-based funding, in terms of their compensation and the incentives around that.
Whitman: So, we have heard this as well. What I love about our partners is that they're very clear: They're in business to make money, and they want to know how they're going to get paid, and transparency around it, and they don't want to spend a bunch of time trying to figure it out.
The programs Dave Donatelli has put in place, to be announced at GPC, are about simplicity: Here is how you make money doing business with us, and it's not going to change.
We understand that not only do we have to make great products, you as a partner have to make equal to or more money with us than you do with our competitors. And if we can combine that with products that customers want, then we will have a home run on our hands.
CRN: Partners tell us HP's sales reps sometimes sell competing products over HP products; are you doing anything to discourage this sort of activity?
Whitman: We would rather sell our products than someone else's. But one of the great heritage elements of HP is we do what's right for customers. And the place we do this more than you might imagine is our services business. So if we're taking over an IT outsourcing deal for a big Fortune 500 company, and they feel very strongly about a particular architecture, we will listen. In the end, we are used to working in a heterogeneous environment, we are committed to open standards and architecture, and we want to have our stuff be the very best. But we are a lot more flexible, I think, than many of our competitors. In this new world order, that is going to keep us in good stead.
CRN: What investments does HP want partners to make in order to make the transition to new business models?
Whitman: They really are our partners -- that's not just a nice word. They need to be our evangelists, and they need to stand up and fight for HP. It is in everyone's interest for HP to be strong -- no one wants to live in a Cisco-only world, an EMC-only world or an IBM-only world.
We been through a lot, we're coming back strong, but we need partners to invest with us, and to believe. They need to be our sales team and our face to the customer. I recently told a group of channel CEOs, 'If people are not speaking highly of HP, you need to defend us. Because you know what our strategy is, you know how good our product line is, you know our commitment to these businesses, and we need you to evangelize.'
In return, HP will be much easier to deal with, partners will get paid well and on time, and we will give partners a set of products that their customers want.
CRN: Last year you talked about the importance of getting rid of organizational silos, and more recently you talked about revamping outdated internal systems. What are other challenges that you've tackled this past year?
Whitman: [Sighs] Wow, we've tackled a lot [laughs]. What do they say, it's not the years, it's the miles?
Listen, there were a lot of challenges at this company. And without trying to solve world hunger, I needed to move a number of initiatives down the field. And this wasn't a case where you could say I'm just going to do one thing to solve all the problems -- that simply wasn't the case.
So I'd say first and foremost, the simplification of this organization, putting global accounts with Dave Donatelli, putting IPG [Imaging and Printing Group] and PSG together. And putting the right leaders in the right position, not just in terms of business but in terms of job functions.
Second, we really have made it easier to do business with us. Our quote-to-cash systems is a hundred times better, and Salesforce.com is making a difference. DocuSign [the eSignature solution HP implemented in May] has cut the time involved in getting a contract signed from five weeks to five days.
We're not done yet. We've got a lot more work to do, but I feel really good about the progress we've made.
What I know from having run organizations like this for many years is that unless you have won the hearts and minds of many people, you're not going to make it. It is a necessary condition for success. And I think in the last couple of months, we have turned that corner. I don't think I'm drinking the Kool-Aid, but I feel we have captured the hearts and minds of HP people. And we are well on our way to capturing the hearts and minds of our partners and customers.
In this goal, we are ahead with our employees, and we are getting there with our customers and partners. And by the time we get halfway through 2013, I think you'll see that flip, too.
CRN: HP just opened its new headquarters lobby and executive briefing center, and it looks out onto a very old tree that was there long before HP built its headquarters there. Is this symbolic in some ways to the turnaround you're trying to institute at HP?
Whitman: Yes, it's a metaphor for what we're trying to do. I am always mindful of the heritage of this company. And I think that sometimes, things happen for a reason. That whole executive briefing center does encapsulate where we are. It is a new face, a rebirth of HP, anchored by a 125-year-old oak tree.
PUBLISHED FEB. 19, 2013