Role of Partners in Enterprise Not Clearly Defined at HP Launch

At an intimate gathering of press and analysts held at the company's corporate headquarters in Cupertino, Calif., chairman and CEO Carly Fiorina proudly declared that the company is ready to execute. Poised and obviously relieved that her $18 billion-plus merger with Compaq has finally cleared all remaining hurdles, Fiorina said the company has already reached several milestones.

HP, for example, has already made strides sorting out its vast product portfolio. It has named managers three levels deep within the company, launched a new corporate Web site and established a customer advisory board. It even revealed that it has won $5 billion in new business from customers within the past three months--commitments that demonstrate customer faith in the merger, Fiorina said.

Less clear is what role partners will play going forward. Clearly the company will rely on them for the bulk of its sales. And it will lean on them heavily to penetrate key vertical markets and pick horizontal markets, including the SMB space. Their very mention didn't come up until late in Tuesday's proceedings and only in passing until a direct inquiry put their role squarely in the spotlight. By then, however, it was revealed that HP remains resolute that it must increase its direct business. In his presentation, Michael Winkler, operations chief at the new HP, noted that the new HP was second in worldwide Internet direct market share and but growing faster than its chief rival, Dell.

In response to a question on the role of partners, president and COO Michael Capellas insisted the company will actively engage partners at all levels. But no specific plans were unveiled to drive business to them, either at the press conferences or in follow-up interviews with key channel executives within the company. Neither Kevin Gilroy, who oversees channel efforts for the company's personal systems group, or Dan Vertrees, who does the same for the company's enterprise systems group, had much new in the way of programs or plans to drive business with partners, though each insisted that allies will play vital roles going forward.

Gilroy suggested partners need to evolve their models. He and Vertrees expect to discuss additional plans with partners soon.

The message from the new HP Tuesday was that the balance of direct and indirect sales would largely be determined by customer preferences, not internal programs and policies to drive business one way or another. Said Peter Blackmore, executive vice president of the Enterprise Systems Group at HP, "once you have the right strategy in place, then the balance between direct and indirect business will find a natural level based on customer preferences."

Fiorina said the question of whether HP would increase or decrease its direct sales missed the point. Her concern is the type and nature of work partners would do with HP. So long as they add value, then there will always be significant opportunity for them to work with HP, she and Capellas agreed.

But exactly how the company will recruit, train, support and motivate partners going forward remains uncertain. Certain aspects of the company's former programs will, obviously remain. HP's vaunted Hard Deck program, for example, will continue to govern where HP's direct sales force focuses. In addition, HP will continue to drive inventory levels down and reduce the number of times products are "touched" throughout its supply chain. But other questions remain.

Analysts note that the answers will provide both opportunities and challenges to partners.

"For VARs that represent both companies--those in the overlap,there's great upside. It's the loyalists of one camp that I wonder about," says Jean Bozman, research director of global enterprise solutions at IDC. "Going forward they, obviously, have some big decisions to make."