Arranged Marriages

HP and its solution providers are about to find out as the Palo Alto, Calif.-based vendor embarks on a new strategy that calls for multiple partners to attack individual accounts in order to garner a greater percentage of the total IT spend. Fueled by a new compensation structure for HP enterprise channel reps and a desire to sell more higher-margin products into accounts already well-populated with HP&'s ProLiant servers, solution providers say the move is an attempt to break down artificial barriers between the volume PC market mentality inherited from Compaq and the value enterprise legacy of HP.

“Compaq and HP have had a problem for a long time where all of their salespeople have made their money selling ProLiants,” said Larry Holzenthaler, executive vice president of sales and marketing at Total Tec Systems, an HP enterprise solution provider in Edison, N.J. “Now a significant group of guys has to sell enterprise servers and storage.”

Starting in its fiscal 2006, which began in November, HP&'s enterprise field-sales reps aren&'t responsible for industry-standard server sales and will only be compensated for enterprise products such as SANs, Unix servers and OpenView. In addition, HP created a new group of Value Territory Reps (VTRs) whose sole mandate is to target all enterprise product opportunities in their assigned geography, including small and medium businesses. “When these guys go into an account that has a volume partner in it, they are going to be anxious to bring a value partner in,” said Holzenthaler. “That&'s going to be great for us.”

Tom LaRocca, HP&'s vice president of partner development and programs for the Solution Partners Organization, said HP is encouraging its solution provider partners to grow the breadth of their HP portfolio. “If they are strictly a volume player right now and they&'d like to get enterprise authorization in one or more product lines, we encourage that.” But he said HP won&'t hesitate to bring an enterprise partner into an account if necessary. “If it means that we have to introduce an enterprise partner into an account, we&'re willing to do that. We don&'t have a call center [selling direct] anymore. We have lead generation that will provide [partners] with leads for their geographic area. It&'s an evolution in our partnership that I think partners will enjoy.”

But some HP volume partners that rely heavily on ProLiant servers are skeptical of the move. Because value partners often sell the gamut of HP products, including ProLiants, many fear the incursion of a potential competitor into what they deem as their accounts.

“It&'s a great idea, but at what point don&'t you own the relationship?” said Pete Busam, vice president and COO of Decisive Business Systems, an HP solution provider in Pennsauken, N.J. He said many traditional HP volume partners are rapidly moving upstream to develop expertise in OpenView and other enterprise-class products. An enterprise partner brought into the account may at some point become an unwanted houseguest. He said that when a value partner is brought into an account controlled by a volume player, strict rules of engagement need to be laid out up front to prevent a Trojan horse situation.

David Booth, senior vice president and U.S. country manager in HP&'s Technology Solutions Group, told a group of HP enterprise partners at an Avnet conference in Phoenix last month that he wanted to break down scenarios in which HP field-sales people were protecting a partner in an account where they may only be selling industry-standard servers. He said some HP channel salespeople fear alienating the incumbent partner by bringing in another partner that has skills beyond industry-standard servers. “I&'ve talked to business partners and you&'ve told me that you are working with a district manager and he or she is unwilling or inflexible to bring you into these accounts even though the partner that is selling there has no real expertise in BCS [business-critical system] units,” he said. “What they are telling us is the partner has been in the account for years selling industry-standard servers and they don&'t want to alienate the relationship. We have to make sure that at the district manager level, at the rep level and at the executive level, we are helping to make the right call to get the right value from the business partner directly engaged with us in the market.”

Booth acknowledged that his comments were aimed primarily at facilitating partnerships in the top 400 to 500 named accounts that HP engages on a direct basis. He stressed that accounts below the named accounts continue to be “partner-led.”

But HP solution providers said the change in HP&'s compensation structure for VTRs means HP intends to bring multiple partners into accounts that in the past may have been served by a single HP solution provider.

“The HP rep can&'t be Mr. Nice Guy anymore,” said Mark Darlington, COO of Trilogy Solutions, an HP enterprise solution provider in Cranbury, N.J. “He has to go in and sell them the enterprise and value products, and if he doesn&'t, he&'s not going to be successful.” Jeffrey Jamieson, vice president of sales and marketing at Whitlock Infrastructure Solutions, an HP enterprise solution provider in Annapolis, Md., said HP needs to bring in multiple partners to increase its attach rate, especially on software. “The attach rate for software is horrible,” he said. “If you look across our entire region, it&'s single-digit at best. The HP reps have done a poor job because they have not been willing in some cases where the partner has been selling desktops or [industry-standard servers] to introduce someone like us because they didn&'t want to upset the gravy train, even though we are no threat to the gravy train. I think their goal in trying to rectify this is a good one.”

But he acknowledged potential conflicts in HP&'s partnering plans. “What [partners selling HP volume products] struggle with is, what&'s in it for them?”

Jamieson said he&'s had discussions with other companies in his area that are more hardware focused, but they were hesitant to talk because they viewed the hardware side of his business as a potential threat. He said his company has entered into accounts with other HP partners in which they agreed up-front that Whitlock would only handle the OpenView side. But even then, it can be difficult to avoid conflicts. “Where we&'ve stepped in and only done the software we&'ve had cases where the customer has come to us and said, ‘We don&'t really like the other guys and you guys are awesome, we&'d like to buy all of our stuff from you,&'” he said. “We&'ve had to say no. But we&'ve told them if you openly want to confront [the other partner] and put them on notice, that&'s a different story.”

Holzenthaler said Total Tec doesn&'t spend a lot of time going out and trying to forge partnerships in accounts controlled by HP volume partners because splitting margins with another partner diminishes the value of the deal. But he said the volume partner might want to take on a value partner as a defensive measure. “From the volume partner&'s point of view, he is protecting the account,” he said. “If the customer is going to buy products that he can&'t sell, he&'s going to have a competitor in the account.”

Holzenthaler said that by proactively seeking another HP partner as an ally to keep competitors at bay is often more important than making money on a particular deal. “Sometimes the money they make in a referral fee [with an HP value partner] is not as important as maintaining account control,” he said.

Other solution providers said the move by HP to bring multiple partners into individual accounts is a sound strategy, but can&'t be forced on partners. “I do think it is a more mature partnering model to bring the right partner in or introduce the right partner to the account as opposed to saying one partner can do everything,” said Gary Melillo, vice president of business development at Melillo Consulting, a Somerset, N.J., HP enterprise solution provider.

Melillo Consulting is nationally authorized to sell OpenView, while focusing regionally in the Northeast selling the gamut of HP solutions including business-critical system products and enterprise storage, Melillo pointed out.

“In OpenView we do have some success where we are not a competitor for other products,” he said. “Resellers don&'t feel threatened to bring us in because all we can sell is OpenView.”

But in his Northeast territory, competitive fears trump the partnering model. “Anywhere where I sell everything else, no one&'s going to bring me in,” he said.

But HP&'s Booth said the vendor and its partners have to make the new initiatives more than a marriage of convenience. “In our top accounts, we have less than an 8 percent market share [of the total IT spend] on average,” he said. “That means there is 92 percent market share that we can attack together. We have to make sure that we align our resources more discretely.”