What's The Score?

By Steven Burke

Bolstered by high marks for revenue and profit potential and managing channel conflict, Hewlett-Packard Co., Palo Alto, Calif., walked away with the VAR Business Annual Report Card (ARC) award in the Midrange (high-end) Servers ($25,000 and above) category.

Overall, HP scored a 70, handily beating Armonk, N.Y.-based IBM Corp., which scored a 67, and Round Rock, Texas-based Dell Inc. and Sun Microsystems Inc., Santa Clara, Calif., both of which finished with a 63.

HP scored an 80 in revenue and profit potential compared with a 75 for IBM, a 69 for Dell and a 65 for Sun.

In the managing channel conflict area, HP scored a 67 compared with 62 for IBM, a 59 for Sun and a 53 for Dell.

Don Richie, CEO of Sequel Data Systems Inc., an HP enterprise partner based in Austin, Texas, said he gives HP a grade of "A" for revenue and profit potential. "We are still making record sales and profits [as an HP partner]," he said. "Our gross profit is within two points of where it was 10 years ago. A lot of it has to do with the HP [PartnerOne] program."

Sequel Data's sharp focus on services also has led to a significant improvement in the bottom line, Richie said. "We're wrapping services around everything," he said. HP scored a 68 in services opportunity on the ARC compared with a 65 for IBM, a 62 for Sun and a 61 for Dell.

Richie said that he is particularly pleased with HP's revenue and profit potential in the midst of the current economic downturn. Many vendors attempt to increase their own profits during such a downturn on the backs of their partners, Richie said. Not so with HP.

"HP has done a good job of minimizing any program cuts for partners and keeping partners whole," he said. "My feeling is that HP is doing a good job of keeping the value of the product and the technology up."

Richie also gave HP high marks for product quality and reliability. "Many of our sales come from the result of other manufacturers' product failures," he said. "We end up replacing those products with HP products. HP has a definite advantage in product quality. We sell a ton of [HP] servers and our failure rate is next to none." HP scored a 92 for product quality and reliability compared with an 89 for IBM, an 84 for Sun and an 82 for Dell.

One reason for HP's product quality and reliability strength, Richie said, is the company's rich engineering legacy and tremendous research and development investments.

As for managing channel conflict, Richie said HP has done "a great job of managing channel conflict with the exception of CDW. We see CDW doing more damage to our marketplace and our relationships than anything I have ever seen."

A CDW-HP alliance set to begin in September has raised concerns among a number of HP partners. According to a CDW Corp. memo obtained by Everything Channel, CDW and HP have reached agreement to co-fund 110 new HP-only salespeople inside the Vernon Hills, Ill.-based solution provider to target accounts with 499 or fewer employees. HP will supply CDW leads by comparing Short Hills, N.J.-based Dun and Bradstreet Corp.'s customer list against historical sales of HP products through HP direct, HP channel partners and CDW, according to the memo. The result will be more than 500,000 net new customers for CDW to target, the memo said.

All that said, Richie said his HP business was outstanding in 2007. As for 2008, he said it has been a tough year but he expects a good year for profits because of Sequel Data's ability to hold the line on costs. "Overall, I'm very happy with the way things are going."

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