Whitman's Partner Profitability Pledge Has HP Partners Literally Cheering

HP CEO Meg Whitman Tuesday kicked off the company's Global Partner Conference with a pledge that partners will make more money selling HP than competitive offerings as the computer giant doubles down on simplicity and profitability for partners.

"Our objective is for us to be the most profitable partner that you do business with," said Whitman addressing several thousand partners in Las Vegas, who broke out in loud applause numerous times in response to changes HP is making that will dramatically increase partner profitability this year. "We are going to reduce the number of programs, and we will put more focus on making our compensation structure predictable. Let me be clear. It is pretty simple. The more you sell, the more you'll earn. That is how we want to run our compensation programs."

[Related: HP Overhauls PartnerOne, Aggressively Recruiting New Partners ]

Whitman has driven major changes in the $120 billion IT giant's PartnerOne compensation model that allows partners to qualify for lucrative backend rebate dollars from the very first sale. Under the old program, partners did not qualify for those rebates until they hit 80 percent of their HP sales quota.

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Whitman, for her part, says those sales quotas made the HP partner compensation model too complex and unpredictable. With the new simplified program, she said, "growth will come naturally because you will have confidence in serving your customers, and we won't necessarily have to have growth objectives that trigger payouts that are a big source of negotiation and frankly have been a big dissatisfier."

Under the old program, 40 percent to 50 percent of partners did not qualify for backend rebates because they failed to meet HP sales quota targets, according to HP.

"You make choices everyday about who you want to do business with," said Whitman. "If we are simple to do business with, you understand how you get paid, you make more money with us than any of our competitors then you are going to do more business with us. I think over time we have complicated this more than we should have. I think the formula is pretty simple: make it easy to do business with us. You need to make more money with us than any of our competitors. You need to understand how the programs work, and we [can't] change them all the time."

Whitman also received thunderous applause when she laid out a new rules of engagement policy that prevents HP direct sales reps from taking an account from a partner. "Importantly -- and I want you to hear this from me -- we now have a very clear policy about taking business away from our channel and going direct," she said. "My message to you is this simply will not be tolerated. Everyone in the HP organization is crystal clear on the behavior we expect. And I am holding myself and our senior executives accountable for behavior that is befitting of HP and recognizes the value you have brought to this company over many years."

Many solution providers attending the conference were looking for signs of HP's channel commitment in the wake of a difficult year partnering with the vendor. A number of partners said HP had become less strategic to their businesses in 2012, forcing them to shift resources to other vendors.

HP partners said they see the far-reaching changes in HP's partner model as a sign of a reinvigorated channel charge that will result in them committing more sales and technical resources to the computer giant.

NEXT: Partners Praise Whitman's Channel Commitment

Solution providers praised Whitman's channel commitment as the key to driving dramatic increases in partner profitability and sales in 2013.

Rich Baldwin, co-founder and chief strategy officer of Nth Generation Computing, a San Diego,Calif.-based HP enterprise partner with $50 million in annual sales, said his HP incentives were down in 2012, but he expects his company's profitability to double this year as a result of the many HP partner program changes. That includes a 50 percent increase in lucrative backend rebates for Nth Generation.

Baldwin said he has seen first hand the impact Whitman has had on the partner program from an October meeting with the CEO in which he complained about the profitability on HP industry standard server sales. One month later, he said, HP upped the Value Express discounts by five percent, which directly impacted Nth Generation's bottom line. HP has also made changes that will increase Nth Generation's New Business Opportunity (NBO) payouts significantly by eliminating a restriction that prevented payouts on value pricing deal, said Baldwin.

"Meg gets it," he said calling her by far the most channel-savvy CEO he has seen in his 22 years of dealing with HP. "Meg has made an incredible difference compared to any of the other HP CEOs. She understands business people and the investments being made by partners. She understands that we work hard and have to make a profit."

Majdi "Mike" Daher, CEO of Denali Advanced Integration, Redmond, Wash., No. 119 on the SP500 with $157 million in annual sales, said he sees Whitman's major channel changes putting HP back on track for growth after a period of instability. He said his HP business was flat last year, the first year in a decade that HP business did not grow for Denali, but he expects double-digit sales growth in his HP business this year.

"HP is back," said Daher."Meg is making it easier for partners like us to make money. Her presentation at the conference demonstrated to me that she is listening and taking our comments and advice and now turning them into actions. It was very, very energizing and reinvigorating."

Rick Chernick, CEO of Camera Corner Connecting Point, a Green Bay, Wisc.-based longtime HP partner, said Whitman's address established a new high water mark for partner commitment from HP. "She is saying exactly what we have been waiting to hear for 40 years from any vendor," said Chernick. "She gets it. She understands. I couldn't be happier. She is absolutely the real deal and has set it straight within HP, letting employees know they need to take care of the reseller. If they don't, they are out. She is passionate in totally embracing the channel. She has done more in a year to save this company and bring it back to the next level than anyone else could have done."

NEXT: Partners Expect Big Increases In Profitability From HP Changes

If HP delivers on all counts, Chernick said, he is going to drop some other vendor product lines and commit more technical and sales resources to HP "because I can make more money with HP."

"It is all about time and money," Chernick said. "I want to focus more on where we are going to make money rather than waste our time. HP is all in. No other vendor does this."

Chernick said he expects his backend rebates to double this year as a result of the partner program changes. "It is going to increase our profitability," he said. "That is huge. That is what we need to go out and get aggressive. With these changes it would be goofy for someone not to want to partner with them. It hasn't felt this good in years."

The partner program simplification will also be key to increasing profitability, said Chernick. "They are taking the garbage out of the day-to-day," he said. "We are so busy that we can't learn all the programs or manage the changes. We spent all this time to become Elite certified and then HP discontinued it. They are not going to do that anymore. They are going to make the programs easier to understand and simple so they can be used by everybody. It is fantastic. They love the reseller again. Thank God!"

Whitman, for her part, made that clear in her address to partners bringing loud applause when she declared: "Everywhere I go, I say one thing to our employees, to our investors and frankly to all of you which is: I love the channel. You are a huge part of HP's success and a huge part of our future."

Whitman also pledged continued improvement in partner program profitability and engagement with partners this year. "We are really excited about what is coming in 2013," she said. "Partners are part of the DNA of Hewlett-Packard. And we are increasing our commitment to the channel because as partners, you are not only an essential part of our past; you are an essential part of our future. This increased commitment includes a significant investment in channel programs and IT initiatives to reward performance, drive demand and simplify engagement with all of you."

It's a message that Dean Cappellazzo, CEO of Bedrock Technology Partners, Sunnyvale, Calif., is taking to heart to commit more resources to his HP business. "This is bringing us back on board with HP," he said, noting that in the last several months he has brought on new talent dedicated to selling more HP solutions. "I am committing more of my resources and investing more in HP."

Cappellazzo said he expects his HP business to grow 20 percent this year with increased profitability. "It could be double digit growth in profitability," he said. "We have been backpedaling for two years. This feels great. HP is back."