HP Revamps PartnerOne

When Hewlett-Packard president and CEO Mark Hurd laid down the gauntlet last summer, saying he intended to "double down" on the company's base of 15,000 partners, it was the first sign that big changes were in store for the vendor's channel. Now it's apparent that the new CEO wasn't just shooting from the hip.

It has been one year since Hurd came onboard to turn around the struggling computing giant, and now HP is about to unleash the most significant changes to its PartnerOne channel program since the $19 billion acquisition of Compaq nearly four years ago. According to partners briefed on the changes--which begin to take effect next month and will be fully implemented by Nov. 1--the news is mostly good.

In a nutshell, the key changes center on higher revenue requirements for PartnerOne Platinum membership; a revamped rebate program; and simplified demand-planning for partners, including up-front market development funds (MDFs).

Under HP's AttachPlus initiative, partners are encouraged to combine as many of the vendor's products as possible into solution bundles. That means packaging HP displays and printers with its PCs, HP storage and servers, and HP services, software and networking offerings with VARs' solutions.

In return, HP is lowering the bar for rebates. Until now, Gold partners had to do a minimum of $10 million in business with HP--a figure the vendor wouldn't confirm or deny--to be eligible for cash back. The new threshold is $1 million, HP says, and applies to any VAR that reaches the minimum, whether or not they're already a partner. Also, VARs that attach HP products to solutions get bigger rebates under the AttachPlus rebate program, which replaces the general PartnerONE rebate plan.

HP executives wouldn't provide specific dollar or percentage amounts, but they say those compensation rates will be determined by formulas that take into account partner attach ratios and performance goals.

"We'll give these formulas to the partners, but it will be behind the firewall," says Tom LaRocca, HP's vice president of partner development and programs.

For those VARs already doing upward of $700,000 in HP business per year, attaching the vendor's products to solutions could bring them over the top easily, LaRocca says. "As soon as they cross that $1 million threshold, they can start participating in the AttachPlus program."

NEXT: Partner reactions

Rich Chernick, CEO of Green Bay, Wis.-based Connecting Point, a longtime HP partner and president of the company's SMB partner council, says he's been waiting a long time for the vendor to make these kinds of changes. "It's huge," he says.

But there's a downside to the changes too. Partners that fail to grow their quarterly HP revenue year-over-year may not be eligible for AttachPlus rebates. Also, partners currently achieve Platinum status by meeting minimum revenue requirements or fulfilling certain training and certification requisites. But starting Nov. 1, HP will base Platinum status purely on revenue results, although execs declined to say what the monetary threshold will be. Existing Platinum partners won't have to concern themselves with the new requirements until November '07.

Meanwhile, Gold partners will be able to maintain their status by attaining any one of eight Elite designations and a minimum revenue level. The revenue minimums for Gold and Platinum VARs, which will be based on annual revenue as of July 31, will go down as well, but HP would not say by how much. Although that promises to increase eligibility for Gold designations, it could have a longterm downside for Platinum partners that rely heavily on certifications vs. revenue to achieve their status level.

"Our Platinum partners need to reach a critical mass of revenue," La Rocca says. "You can't just have certifications and then achieve a Platinum membership." The changed membership requirements will force partners to earn more targeted certifications, but only a single-digit percentage of Platinum partners should be affected, La Rocca says.

Ultimately, the partners that will suffer most are those that offer "contentless" HP offerings--that is, those that lead with HP product but bundle with wares from other companies.

"Mark Hurd had been very noisy about saying HP would only support resellers who are really providing value to HP," says Kris Rogers, executive vice president of PC Mall. "That sounded scary. Would they [VARs] have to be exclusive [with HP]? But if this is the way [his message] manifests itself, with HP delivering programs to the channel that make financial and marketing sense, then everyone will benefit from that."

According to HP execs, the company is aiming its new incentives at getting partners to move outside their comfort zones. For Connecting Point, which has historically offered mostly imaging solutions and servers, that has meant adding HP's storage products to the mix over the past several months.

"A lot of small resellers don't have the financial wherewithal to buy a SAN and put it in their inventory," Chernick says. "But HP has programs in place if you commit." He says the vendor offers training and marketing resources to offset the cost of getting up to speed in storage.

To support its plan to offer up-front MDF payments, HP is also changing its marketing-planning process. Instead of having to submit claims by way of a Siebel-based partner resource-management system, Gold partners will be able to submit their demand-generation maps via spreadsheet. Once the plan is approved by an HP rep, the partner receives payment.

"In the past, you'd have to lay the money out, file a claim, and then wait," Chernick says. "Getting it up front is tremendous for the bulk of resellers out there. I don't remember anyone ever giving me a check to hold an event, and I've been in this business a long time."

For HP, one question remains: Will these incentives be enough to boost both top-line and bottom-line growth?

Partners have been reluctant to bundle HP products in the past because that hasn't been a particularly attractive option. Third-party printers and displays, for example, were far less expensive than HP's, Chernick says. But now HP is pricing its products more competitively, making it "easier for a channel salesperson to recommend an HP solution," he adds. "Having the marketing support and rewards can tip the profit equation."