HP CEO Gives Iron-Fisted Warning To Partners

"We are going to have an iron fist on doubling down [on partners committed to HP]," Hurd said during a session with institutional investors at the Citigroup Global Technology Conference in New York. "For the people who want to play with us, we are going to play with them twice as hard. To the people that don't, we are going to get them out of here."

Hurd said he&s not anti-channel but merely aims to zero in on solution providers that are "pro-HP," rather than partners that don&t deliver high attach rates and upsell numbers. In fact, he said HP won&t pay market development funds to partners that sell a solution with as much as "35 percent to 40 percent non-HP components."

"We have got to make sure we are selecting our partners right on the channel side and they are very aligned with HP," Hurd said.

The one-hour session at the conference proved to be Hurd's most expansive view yet of how he views the channel. Hurd said HP plans to be "very introspective" about its channel strategy and will carefully mine channel data to determine which partners are delivering high attach rates and upsell business in HP's installed base of customers.

"Believe it or not, every channel partner I see says, 'I am with you every step of the way.' Yeah, OK, let's go look at the data," Hurd said in a mocking tone. "By the way, the data is all over the place. So this is going to take us time."

"We have got to go mine that [partner] base and take advantage of the opportunity we have got. And we have to cull through these channel partners,” he added.

Such a mandate would require radical rethinking of how HP is organized and how it interacts with solution providers, said Michael Healey, president of TenCorp, a Needham, Mass.-based HP partner.

"HP's sales, operations and current divisions all run in many ways as separate fiefdoms," Healey said. "If he is going to redesign the internals of HP to make HP actually support us so it is easier to get products and solutions, versus having to deal with the HP bureaucracy with different divisions for printers, servers and storage, then I applaud it. If he is saying he wants us to do more but they are not going to change how they do business, he is off base."

HP could improve the way its does business with the channel by being better aligned with partners, according to Healey.

"We must have eight, nine or 10 different HP reps. That is not efficient. That is not helping me win business,” he said. “We have three different credit lines with HP for different divisions. HP does not have a focused, customer-based solution. It is disjointed because they are organized by product line. The channel is not. We are organized by service for the customer. HP needs to realign itself to focus the same way we do. That is a major undertaking."

Hurd stressed that profits in the computer industry are not typically made on the core box but in the aftermarket via product attach rates and upselling.

"I get questions that are these big thermonuclear war questions about, are you blowing up the channel? Are you getting out of the channel or going all direct? We are not going to do anything nearly so binary,” Hurd said. “But the issue is that all channel partners aren't the same. We have channel partners that frankly use the HP box, the HP brand and the HP logo and fill it up with other components and say they are selling an HP product. Well, I don't need partners like that.

"If you want to work on HP-logoed product and participate with HP attach, you will find no better friend than Hewlett-Packard," he noted. "If you want to participate and intermediate me or the company, if you will, from all those markets, we'd rather not have that revenue." Pete Busam, vice president and COO of Decisive Business Systems, a Pennsauken, N.J.-based HP solution provider, applauded Hurd's doubling-down message, calling it a shot across the bow of partners that go to market with HP yet often replace its products with third-party offerings.

“If you are going to sell an HP SAN, then you should take the whole thing from HP and get a single source that you can stand behind and champion. I think that is a great idea,” he said.

"I think it is good they are going to double down on partners committed to HP. I hope they double down with companies like us that have had nothing but loyalty to HP and fought tooth and nail for the company during difficult times,” Busam added. “We have converted 35 of 37 Dell accounts that we had to HP, and we continue to take that message to the street." He said his HP business will total $3.5 million to $4 million this year, up from $600,000 three years ago.

Still, Busam pointed out that HP can&t always provide the full solution, so other vendors& products often must be used. "HP doesn't have everything," he said. "So there is going to always be some third-party product."

Don Richie, the CEO of Sequel Data Systems, an Austin, Texas-based solution provider that bills itself as an HP-exclusive company, said he couldn't be happier with Hurd's doubling-down pledge.

"This is a new, strong position they are taking and, to be candid, they should have taken it a long time ago," Richie said. "They have been supporting companies who would sell HP, IBM, Sun and virtually everyone else. A lot of these partners have had large overall numbers and were getting good treatment, while other partners may have been somewhat smaller but were 100 percent invested in HP and didn&t receive the type of support we needed. This has been a long time coming, and I am absolutely thrilled that they are starting to see and reward solution providers that have been loyal to them."

As HP refines its channel strategy along those lines, big channel players that have been supporting multiple vendors likely will feel the impact, according to Richie.

"You are going to see companies that end up supporting multiple manufacturers [by] taking the easiest course to sell anything [get] hurt," he said. "There is not another company that has the product breadth and services that HP has. That is why I continue to hitch my wagon to that horse."