HP's Enterprise Mess

On Feb. 1, HP changed the distribution plan for its HP 9000 Unix servers and enterprise storage. HP still handles the physical distribution of products but sells them to its enterprise distributors which, in turn, set pricing and sell them to solution providers.

The program has been a mess since the get-go. It was supposed to launch Nov. 1 but was postponed. Then, when it finally rolled out in February, HP's direct-sales people somehow didn't get the message that they were out of the pricing business and were still trying to set prices for solution providers on deals. Moreover, HP is still having difficulty communicating with distributors to reconcile exactly how much product individual solution providers sold during a given period. That problem of reconciling sales volumes is spreading chaos. Solution providers' PartnerOne rebate points get messed with, and HP's direct-sales people aren't getting proper or timely credit for their channel sales. If those same salespeople see a straightforward process when they sell direct and a mine field when they work with the channel, which way would you expect them to go?

Then there was the SAP conversion at HP's enterprise distribution facility in June. It didn't go smoothly, and solution providers' product shipments were dead in the water for several weeks.

The enterprise distribution plan is symptomatic of HP's enterprise channel strategy over the past several years. Distributors will tell you that their HP enterprise sales are only half of what they were three years ago, largely because HP decided to take its largest enterprise accounts direct and shift channel efforts to SMB. So what did HP solution providers that made a living in the enterprise do? They went out of business or signed up with Sun Microsystems and IBM as fast as they could. That's the mess HP's enterprise channel business is in. Gilroy is gone, but someone at HP better fix it fast.

CRAIG ZARLEY is Industry Editor at CRN. He can be reached via e-mail at [email protected].