HP CEO: More Channel Support On The Way

"We are looking for aggressive help, and we'll get just as aggressive as we possibly can to go to the marketplace and win in these strategic battlegrounds," Hurd said in a keynote address to some 1,200 solution providers attending HP's Americas Partner Conference in Las Vegas. "We need you. We need your help. There's virtually nothing we wouldn't do short of illegal or unethical to help you go to the marketplace and win."

Hurd promised continued support to the channel and improved operational efficiencies from HP, which he said will help HP and its partners win together. But that winning combination may include fewer HP partners in the future, he said.

In response to a question from a solution provider on where he sees HP as a company in three years, Hurd said, "I hope we would be leading in most efficiency categories. I hope we are in a three-year evolution of the trends and strategies I have described and the channel, if it is not doing the same percent of business, [will be] doing more.

"But at the same time, I would like to see a higher attach [rate] and higher loyalty indexes coming out of our channel," he added. "If that means [we] coalesce around fewer channel partners, I'd be fine with that. If you look at our aggregated list of channel partners, we almost have as many people that call themselves partners as we have employees in the company. We want to put more energy behind key partners that really want to rally behind us."

John Thompson, HP's vice president and general manager of the Solution Partners Organization, Americas, noted that in his region alone, HP has "25,000 strong partners."

But late last month, HP sent letters to some smaller solution providers abruptly terminating their HP authorizations. In a letter dated May 26, HP wrote the affected business partners, telling them that "HP hereby notifies you that the Agreement will expire on May 31, 2006, and will not be renewed or extended beyond May 31, 2006."

A West Coast solution provider who received a termination notice from HP, said, "I'm afraid that I made a mistake in selling 35 HP small-form-factor systems to a client of mine in the last month or so, especially considering that they will likely be purchasing 40 more systems and I'll be forced to sell them some other system instead of HP." The solution provider said his HP contract was terminated without cause.

Tom LaRocca, HP's vice president of partner development and programs for the Solution Partners Organization, said earlier this month that the terminations didn't signal any wholesale purge of partners but rather was an ongoing update of HP's partner database affecting partners who, for a variety of reasons, may be out of compliance with their partner contracts. Solution providers agreed that thinning the ranks of partners who may only occasionally sell HP products seemed to be a good idea that would cut costs for HP and make the overall channel stronger. In fact, Hurd's fighting words to the channel resonated with partners who punctuated his keynote with frequent applause and laughter.

"If he delivers on what he said, he's right on the money," said Rick Chernick, CEO of Camera Corner Connecting Point, an HP solution provider in Green Bay, Wis. "This is the leader that we are all going to get fired up to follow. What I liked was that he said he was going to keep his [management] organization in place. He likes the people he's got; now he's going to work the partners as hard as he can to get more out of them. This guy has passion and he's going to get the job done."

Hurd cited industry-standard servers (ISS), specifically blade servers, as a key battleground for HP. He said HP faces pressure in the ISS market with IBM moving down from its mainframe base and with Dell moving up from its PC heritage. To back up Hurd's message, HP will launch on Aug. 1 a back-end rebate plan for ISS that will increase rebate payments to partners by about 50 percent.

In the battle against Dell, Hurd said, "The good news for us is that we are not that good [in efficiencies and execution], but the bad news for them is that we are going to get a heck of a lot better. And I don't think they have room to move."

Hurd also noted analysts' projections that HP will bring in $91 billion in sales for its fiscal 2006, a number that would likely help it pass IBM as the largest technology company in the world. He said that for decades, IBM, at the bottom of its press releases, has always referred to itself as the world's largest IT company. If HP passes IBM for the honor, "watch the bottom of the press release," he joked.

Steve Harper, president of NMGI, an HP solution provider in Hutchinson, Kan., added, "It's great to hear total commitment from the top to the channel, especially with the competition and market pressure we face. A year into the job, he gets it and understands what the channel is all about."

Hurd also told partners that he believes the hidden pool for increased profits and revenue is in higher attach rates for HP products. "Attach, attach, attach," he said. "Attach has a bigger impact [on profits] than share gain."

Hurd also reiterated HP's plan to hire hundreds of new salespeople to expand HP's coverage in accounts. He said that in accounts where there is an HP salesperson who has face-to-face contact on a regular basis with the customer, HP has two-and-a-half times the market share as in those accounts without HP coverage. But he said that more HP direct salespeople "is not a statement on channel direction."

Rather, it's an indication that HP is aggressively going after more market share. "If we create more demand for HP, that's good for you," he said. Meanwhile, David Booth, senior vice president and U.S. country manager for HP's Technology Solutions Group, said HP business partners that have been mapped into the vendor's TSG sales organization are growing their HP business notably faster than other HP solution providers.

"The [partners] that are investing wider and deeper with us are growing at a much greater rate than those that aren't," Booth said.

Booth said the nearly 60 HP enterprise partners selected to work closely with the TSG sales force in a plan announced last year are growing at a double-digit clip, or about twice as fast as the projected 5 percent growth in the North American IT market.

"The players that have really doubled down with us are growing twice the rate of other [HP] partners on average," he said. "If I don't get double-digit growth out of business partners, I can't hit my [sales] plan."

Rich Baldwin, president and CEO of San Diego-based Nth Generation Computing, an HP enterprise partner that participates in the TSG sales engagement plan, said he's been brought into several large accounts as a result of the tighter HP partnership.

"We are seeing significant growth [as a result of the sales engagement plan]; my business is up 30 percent to 40 percent so far this year," Baldwin said. Some other TSG solution provider partners said they have yet to see any significant business as a result of the partnership, but they acknowledged that progress is being made in teaming with HP's direct sales force.

Jack Novia, HP's senior vice president, TSG, Americas, noted that 200 solution provider salespeople recently went through joint training sessions with the TSG direct sales force.

"We are maturing the model now so that it's going to be hard to determine who the HP person is and who the channel partner is This is a huge advantage for us," he said.

Hurd promised to build strong and consistent channel relationships. "If we tell you that we are going to do something, I don't want you always to feel like you [have to] like what we say, because we'll never always agree on everything," he said. "But if we tell you that we are going to do something, [know] that we'll do it."

John Marks, CEO of JDM Infrastructure, an HP solution provider based in Chicago, said Hurd's comments indicate that HP's CEO, after 16 months on the job, has gotten channel religion. "He's found out that the channel is a pretty powerful force," he said.