HP Mounts SMB Partner Offensive

"The channel is going to play the key role in this space," said Duane Zitzner, HP's executive vice president, PSG. "[PartnerOne is about how we can help the channel become even better and more effective in SMB."

Kevin Gilroy, HP's vice president and general manager, North America commercial channels, said HP is actively recruiting and encouraging solution providers to step up under the new program from the Business Partner level, which has no sales quotas for entry, to the Gold or Platinum level. Since the PartnerOne launch, the number of solution providers certified for Gold or Platinum status has jumped by more than 70 members, Gilroy said. When PartnerOne was launched Nov. 1, fewer than 400 of HP's 21,000 North American solution providers attained the Gold or Platinum level.

"We have no brakes on the number of partners that can become Gold or Platinum," he said.

To achieve PartnerOne Gold status, solution providers must generate $10 million in annual HP sales or maintain five HP certified technicians on staff. The Platinum level requires $75 million in annual sales or 15 HP certified staffers.

Gilroy said HP understands that some of its strongest SMB solution provider partners may never attain Gold or Platinum status but can still be heavily involved in HP's SMB strategy. HP is set to launch in early February a new Opportunity Zone SMB program that will bundle ISV applications with HP hardware and software to create vertical solutions, such as one for small banks. Solution providers that join the program will be granted an exclusive territory into which they can sell the HP solution, which will not be offered by HP direct, HP executives said.

Zitzner added that SMB solution providers that do joint account planning with HP will stay on the vendor's radar screen even if they don't achieve the Gold or Platinum level. "It's very similar to what we do with our big accounts," he said. "We work with the partner to mutually identify opportunities."

HP's effort to enlist SMB solution providers comes at a crucial time. PSG lost $87 million on revenue of $5.1 billion for its fiscal 2002 fourth quarter, ended Oct. 31. That's a marked improvement over the third quarter, for which PSG recorded a loss of $198 million on revenue of $4.8 billion.

The company said that for the fourth quarter, 46 percent of its North American commercial shipments, including PCs, notebooks and handhelds, went direct.

But Zitzner said engaging the channel to improve SMB sales is crucial. "The vast majority [of direct sales are in the enterprise and global space," he said.

What's more, even in the large-account space, channel partners are often involved in direct sales, he said. "We have had situations where the customer said, 'We want to deal with HP directly,' " Zitzner said. "But we wound up having the channel partner do a lot of the logistics, and we actually beat Dell in that account. The customer is working with us, but it is that combined [HP-channel capability that is really winning."

Some solution providers have been wary of the vendor's PartnerOne program because they say the bars for Gold and Platinum status are too high for many

to reach.

"How is someone going to do $10 million with one vendor?" said Steve Harper, president of NMGI, an SMB solution provider in Hutchinson, Kan., and a member of HP's SMB Executive Partner Council. "If you take the premier SMB channel in the world, which in my opinion is Ingram Micro's VentureTech [Network, the average member is doing about $5 million in aggregate sales with all of his vendors."

Harper said his company is unable to meet the certification requirements to attain Gold status.

"It can cost $10,000 to $50,000 to get five guys certified, even if HP pays for the training," he said. "There's no way I can get back that much revenue. Yet I can service clients in 20,000 square miles for them."