HP CEO Whitman: Dell's Broken Channel Pledge Is 'Kiss Of Death'

Hewlett-Packard CEO Meg Whitman said Dell's failure to follow through on a pledge to turn over 200,000 accounts to channel partners is the "kiss of death."

Whitman told CRN that Dell's widely acknowledged failure to follow through on a pledge made at last year's DellWorld conference to move 200,000 accounts to partners is rippling through the channel.

"They talked a lot about turning over 200,000 customers to the channel," said Whitman in a CRN interview after her appearance at CRN parent The Channel Company's BoB Conference. "It didn't really happen. This is the kiss of death. If you do not deliver on your promises to the partners they have a very long memory and they really understand."

[Related: CRN Exclusive: HP CEO Whitman On Dell, Autonomy, And Future HP Acquisitions]

Whitman said HP's channel DNA legacy is in sharp contrast to Dell's channel rhetoric.

"Well they are talking a lot about it. It is not the history of that company," she said. "This is our history. This is our DNA. This is who we are. And the channel is a unique ecosystem. It is different than Dell Direct. I understand what they are saying. We'll see what they can deliver."

Approximately 75 percent of HP's sales ($79.8 billion of its overall $114 billion) goes through the channel. In contrast, Dell's channel sales account for one-third of Dell's global commercial revenue, about $20 billion. That includes 60 percent of the company's software business and two-thirds of the company's federal government business.

Cheryl Cook, vice president of global channels and alliances for Dell, pointed to Dell's sharp channel sales growth to show "the speculation we’re not committed to the channel is grasping at straws."

Dell's total global commercial channel revenue in the company's second quarter of its fiscal 2015 is up "double digits percentage growth, including with double-digit gains in Client Solutions, Enterprise Solutions and Software," Cook said. What's more, she said, Dell's 20 percent compensation accelerator resulted in 25,000 new orders including 2,400 new storage orders between February and August.

"Obviously Dell and partners both continue to grow their businesses," Cook said. "It's the combination of Dell's unmatched stability, end-to-end solutions and partner profitability that illustrate our deep commitment to the channel."

NEXT: Whitman Is Proud Of HP's Channel Track Record

Whitman is proud of HP's track record of keeping its commitment to the channel.

"When you say you are going to do something you better do it," she says. "That is what I am really proud of over the last three years. We said we were going to deliver more partner focus, Unison, SmartBuy, DirectQuote, deal registration and we have done it. You have got to mean what you say and say what you mean."

Dell made the 200,000 direct accounts pledge last December as part of a massive channel offensive that included a 20 percent "compensation accelerator" for the company's direct sales team to generate new enterprise business with Dell channel partners.

The problem, Dell partners said, is that the company was not ready to quickly execute the strategic account mapping and planning on a massive scale with its thousands of direct sales reps and channel partners. They said Dell has made significant progress with that account planning over the past several months.

As for HP, partners said the company has made significant increases in channel investments and incentives since Whitman took the helm three years ago. That includes a $100 million bet on the Unison Salesforce.com portal. The Unison portal is winning raves from partners along with continued improvements in areas like deal registration and market development funds.

John Kolimago, vice president of technology solution sales at Anexinet, No. 213 on the CRN SP500 list of the top solution providers, said Whitman's strong channel commitment and track record have kept Anexinet from looking at competitors like Dell.

"Meg [Whitman] continues to do what she said she was going to do, which is continue to invest in the channel," Kolimago said. "We see HP putting channel investments where the the puck is going. And I know when they say to me they want me to be there with Moonshot or any new technology and I say, 'Great, help me get there by investing with us.' Their executives in the [enterprise channel] Terry Richardson and Sue Barsamian, are there ready to line up with us to support us. That is why we don't have to think about Dell or anybody else. When HP says they are going to do something, they do it. They have helped us grow our business."

Kolimago said Anexinet's HP business is up 30 percent this year with its HP storage business doubling year over year.

NEXT: Dell Was Built As A Direct Sales Organization

Mike Strohl, CEO of Concord, Calif.-based HP Platinum partner Entisys Solutions, No. 253 on the 2014 Solution Provider 500, said Dell's channel offering and commitment is simply not in the same league as HP's channel DNA.

"Animals don’t change their stripes," he said. "Dell was built as a direct sales organization. That is who they are even though they have built a channel program. They are at heart a direct sales organization."

Strohl said he has seen Whitman put herself and the company on the line for partners time and time again. Whitman recently appeared at an Entisys customer conference in California after flying all night from meetings in New York with investors regarding the HP split into two companies.

"That is a testament to HP as a channel organization, she kept her commitment," he said. "That has been what it has been like since she reestablished the HP founder's DNA concepts with a commitment to innovation and partnering."

The CEO for a large national integrator, who did not want to be identified, said he has seen Dell making gains with Dell direct sales reps working to move accounts to partners. In fact, he said a Dell rep worked with his company on several thousand small accounts.

All in all, the CEO said Dell is making channel gains with his Dell business doubling and tripling from a small base.

"Don't forget Dell's channel business started from zero," he said.

At the same time the CEO's Dell business has grown dramatically, while his HP business is flat.

"We see Dell being more streamlined with the channel, quicker to give pricing concessions and quicker to support customers and partners with demo and seed units," he said.

But another top executive for a large national systems integrator, who did not want to be identified, said his company attempted to work with Dell early on with regard to the 200,000-account pledge and ran into a wall.

"Dell's relationship with the channel is a marriage of convenience," the executive said. "We see HP much more committed and motivated to work with partners. If everything lines up right, then Dell uses the channel. If it doesn't, they go direct for a little more margin. To me, their channel growth is a testament to the fact that customers would rather buy from partners who are trusted advisors than from Dell Direct."

PUBLISHED OCT. 21, 2014