Is It Too Late For HP's Whitman To Mend Channel Fences?

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In her inaugural address to HP partners last February, Whitman pledged to stabilize the company as a first order of business. "I want to be a steady hand on the tiller for this company," she told partners at the event. "We're going to return to being the reliable, trusted partner you can count on to build your businesses."

It all sounded great to turmoil-weary partners, who greeted Whitman's first conference keynote with thunderous applause. And then the rest of 2012 happened, and distraction after distraction muddied the waters, diluting the impact of Whitman's message and leaving partners wondering if it was all just lip service from a seasoned campaigner.

When Whitman gives her state of the union address this year, she'll likely be facing a more skeptical audience. But unlike last year, Whitman is coming to the table with a much deeper understanding of the HP channel. She clearly has spent a lot of time familiarizing herself with its needs and pain points. While many of HP's broader problems are beyond Whitman's control, she is making it a priority to fix those that exist within the HP channel.

Whitman's first big step toward rebuilding trust in the channel comes in the form of revised rules of engagement for HP salespeople, which will be unveiled formally at the conference. Under the new rules, HP said it won't move a customer from an indirect sales model to a direct model on registered deals without informing the channel partner serving the account. HP also said it will only take a customer direct if the customer asks for that type of relationship.

HP partners that run into problems with HP salespeople will be able to escalate issues to HP executives. Most important, HP salespeople that ignore the rules and try to poach deals and customers belonging to the channel will find themselves looking for new jobs, according to Whitman. "If you are scooping a partner deal that you have no business having your fingers in, at all, then we will take care of that. It's not appropriate," she told CRN.

Whitman hopes the stronger rules of engagement will send a clear message to HP's salespeople, who've grown increasingly brazen with the channel, perhaps due to the lack of clear direction that comes from having three CEOs in as many years. Partners told CRN this aggressive behavior is seen most frequently in HP's Enterprise Group, particularly in the commercial and global accounts customer segments, where the role of that channel has not been well-defined.

In HP's commercial accounts, the Enterprise Group channel strategy has been sorely lacking, sources said. "HP sales reps won't bring partners into deals, and that's a problem," one large enterprise partner told CRN. "They're happy when you as a partner close a million-dollar deal, but you won't even get a thank-you card. When you're working side-by-side with them on deals, they're your best friends. But if you're a multivendor VAR, they will do everything in their power to create problems for you," the partner said.

"We've had cases where we were brought into opportunities by another vendor, and when HP's [Enterprise Group] sales reps found out we were in there, they went in and offered a heavily discounted price," said the source. "HP's reps knew they weren't going to win the deal; they just wanted to damage our profitability."

A number of partners that once sold the entire HP product line used to get higher back-end rebates for their commitment, they said. Despite being considered among HP's most loyal partners, some have lost customer accounts to HP's Enterprise Group sales reps, who have been known to play the "customer asked for a direct relationship" card to justify their actions.

It's this sort of behavior that HP trying to stamp out with the revised rules of engagement. Sixty percent of the Enterprise Group's revenue currently goes through the channel, and Dave Donatelli, head of the Enterprise Group, said that figure has increased since he was appointed to run the unit in March. Like Whitman, Donatelli is vowing to deal harshly with HP sales reps that violate the new rules. "If we see anybody not acting on that goal, we weed them out quickly, in terms of our own people," Donatelli told CRN. "If they don't follow our rules of engagement, we take that very seriously."

However, HP may be leaving itself a loophole in the new rules by saying it will accommodate customers that want to work directly with HP, said an executive from a multinational partner. "The minute the customer says they want to buy direct, that's where HP is going to get into trouble," said the source. "Instead of saying yes, HP needs to defend the channel and explain why partners need to be involved in the deal."

HP did not respond to a question from CRN about whether the new rules account for such a scenario, nor could it provide a figure for how many of its salespeople have ever been fired over channel conflict.

None of the partners who've lost customers to the actions of HP salespeople would speak on the record with CRN for this story due to fear of retaliation from HP. But their stories are well-known throughout the HP channel. Even HP partners that have good relationships with the company will grumble privately about the impact that overaggressive HP salespeople have had on channel harmony.

Partners that have moved business away from HP told CRN they're getting better rebates and incentives from Cisco, Dell, EMC, NetApp and Juniper, among other vendors. One VAR executive told CRN his HP business has declined from 85 percent to 40 percent over the past three years, during which time he has diversified into Cisco with UCS and EMC with storage.

An executive from a national HP partner told CRN he has diversified his portfolio due to conflict and turmoil in HP's channel and has not regretted the decision. "Our Cisco business is exploding, with triple-growth last year, and that growth has come at the expense of our HP relationship," said the executive.

NEXT: Whitman's Plan To Rebuild Channel Trust

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