CRN Interview: Long, Bailey, Hamada, Raymund, Grainger

The hullabaloo surrounding the merger between Hewlett-Packard and Compaq Computer has quieted somewhat, but one thing that hasn't subsided is distribution executives' concerns about the marriage and HP's new channel strategies. editors recently asked Mike Long, president of Arrow North American Computer Products; Bob Bailey, executive vice president at Pioneer-Standard Electronics; Rick Hamada, president of Avnet Computer Marketing; Steve Raymund, chairman and CEO of Tech Data; and Mike Grainger, president and COO of Ingram Micro, how they'd like to see HP shape up in 2003.

CRN: What advice do you have for HP going into the new year?

MIKE LONG: The greatest threat you face is when your sales force, which is the channel, isn't clear on your direction. Then they hesitate, and when you [do that, you] lose orders.

BOB BAILEY: I see [HP] starting to become very externally focused. For a long time, they were internally focused and not focused on the end customers. That can cause you problems. But now I see they're really starting to get focused on their competitors and end users.

RICK HAMADA: Getting externally focused and not losing confidence in your channel [is important]. If they get nervous or hesitate, that's a hiccup you don't want in the system [when you have to make tough decisions such as] how many distributors to use or whether to use a direct or indirect model.

%85 I just want to make sure I understand from HP if there was something I wasn't doing that led to the decision to add [Pioneer-Standard as a third distributor]. If Pioneer has to focus on incremental business early in their agreement, which appears to be the case, does HP feel that I or the other partners weren't getting them incremental business up front, or that we weren't getting them enough of that business?

STEVE RAYMUND: I think HP's biggest challenge at this point is to stabilize their market share while engineering a profitable business model, which they're doing.

They need to tackle issues related to SG&A, working capital and inventory turns. The area of concern for me and others in the channel is that the company adopt a dispassionate, analytical approach to deciding how to organize its channels rather than defaulting to dogma or doctrine that a direct [sales strategy] is best. We don't think the issue is [whether to go] direct or indirect. We think it's about the supply chain and costs.

CRN: What will it take for HP to understand that the issue is not whether to go direct or indirect but how their supply chain is managed?

RAYMUND: There are a lot of direct companies that are losing money, so if direct alone was sufficient, we would see more than one successful direct operation out there.

Even today, HP has migrated a lot of its channel business to direct sales, and it hasn't yet translated to profitability. In fact, their most profitable division by far is the one that is exclusively channel-dependent. Let's not get misled by the red herring of direct vs. indirect. Let's focus on SG&A costs, costs to the channel and what we can do to minimize touch and eliminate the accumulation of inventory in the channel.

MIKE GRAINGER: [HP has made] a lot of changes fairly recently, but until we see the end results of some of those changes, we can't decide whether those were good moves or bad moves.

If HP wants to make a part of its business look like Dell's, they can't be distracted by Dell envy,if that's what it is,and water down the rest of HP, which is a very good company. They have to pay attention to what's really good about HP and what's really good about the partners that made them successful throughout the years.