HP's Gilroy Tired Of New HP's Channel View

"I'm extremely tired of hearing in the new HP that the channel doesn't generate demand, they fulfill it," he told a packed room of over 350 solution providers Thursday at Ingram Micro's VentureTech Network (VTN) Invitation conference in Rancho Mirage, Calif. "That's baloney."

But during the same speech, Gilroy, who warned solution providers that HP will drive its direct systems sales to offset flagging revenue, said the majority of executives realize the company can't effectively penetrate the SMB without solution providers. "We do believe we get it despite some of the feedback we're getting," said Gilroy, vice president of commercial channels at HP. "We hear you, we listen."

Solution providers, however, said HP executives have got to do a better job or they will take their business elsewhere. One major complaint they voiced at the conference involves an increase of HP's direct sales force in the lower end of the SMB market. "If the VARs role is to sell into the SMB then why does HP have a direct SMB group going into my market?" asked Jennifer McCadden, president of Universal Connecting Point, a solution provider based in Pittsford, N.Y. "They are killing all of our efforts because they are trying to mirror them."

Ethan Simmons, a partner at Netteks Technology in Boston, also has seen conflict increase in the small business and other markets. "I noticed a lot of conflict, especially in the education space, with HP," he said. "They have their own sales reps in there and we're in there too. I don't know how it can work out."

The other complaint centers around disparities between the "business" and "gold" levels in HP's new Channel One Partner Program. To reach the gold level, solution providers must sell $10 million in product and have five certified HP engineers on staff, something that most VARs serving the SMB market say they can't achieve. The gold level provides higher profits, financial incentives and other benefits that give gold partners an unfair advantage, solution providers said.

"We should have all been certified as gold-level partners," said Leonard DiConstanzo, senior vice president of business development at Emtech, a solution provider in Cranford, N.J., referring to VentureTech members. "We've proven that we can effectively serve all markets, despite our size."

Several VTN members said they would have forgiven HP for its channel sins if the company granted the group gold status. "HP would have been the hit of the show if they made us gold,"said Henry Hung, president of CPU, a solution provider in New York City.

Instead, solution providers grew more frustrated when Gilroy said HP's direct sales efforts to will increase to offset flagging PC sales. That business, he said, dropped $240 million in the last quarter. In eight of the 10 last quarters it lost money and it lost market share in nine of the last 10 quarters, he added. "We need change and change is painful. Change is inevitable and it will continue," Gilroy said, noting that the revenue and market share of Dell and of direct marketers like CDW continue to grow in a down economy.

Gilroy, however, did say that the new HP is working on pricing governance and a neutral compensation policy among its sales force. "There is no reason why any sales rep at the company has to move business from direct to indirect," he said. "There are some renegades in the company. But the direct mode of HP will not have predatory pricing. We will control pricing. It will be neutral. You can hold me personally accountable for that."

Despite the beating Gilroy often takes as being the messenger for HP's new strategy, solution providers said they're thankful that at least one person in the company is listening to them. "Gilroy is doing his best," said Mike Mills , vice president of OEM sales and new product development at Sherlock Systems, a Buffalo Grove, Ill., solution provider that focuses on digital technology. "If he wasn't there, we'd have no one fighting for us."