Talking Shop With HP's SMB Brain Trust

This week, CRN sat down to talk about the business of serving small businesses with Meaghan Kelley, vice president of the SMB Strategy Group in Hewlett-Packard’s Solution Partner Organization - Americas; new HP SMB Advisory Council president Romi Randhawa, the CEO of solution provider HPM Networks; and Paul Morris, CIO of Bay Federal Credit Union, a top HP and HPM Networks customer.

Which of the three SMB segments that you break down by size is the toughest nut for HP to crack with its channel partners?

Meaghan Kelly: The way that we look at it, in the segment of 1 to 9 employees, classically people will probably go into Best Buy or Costco or Fry’s and just buy off the shelf. So in that one, we’re not necessarily putting proactive strategies into place, but we do have a reactive strategy in place for those customers who want to buy, absolutely we’ll service anyone who wants to do it. But I wouldn’t say that’s the primary market.

In the 10 to 99 segment, it’s a tough segment to crack because it’s more of an acquisition type of customer. It costs a little bit more, it takes a little bit more hand-holding. That’s where channel partners become very important, because a lot of those types of customers won’t even have an IT department or a CIO. From that perspective, the channel partners come in and they’re really able to add the extra piece in the value-added service around the HP portfolio and really bolster that opportunity for us. That’s an important segment.

And then the 100 to 999, and you could even stretch that higher if you wanted to, that’s classically where the HP business has been and where partners like Romi play very strongly. I’d say in the last 12 months, we’ve shifted that to not only retain and grow that particular segment, put also we’ve put things in place for partners like Romi to be able to serve that 10 to 99 segment. And so you’ll see all of the strategies now going down into that smaller space that allow people like Romi to go in there and crack that nut.

Is that 10 to 99 segment where you’d say managed service providers operate?

MK: Yeah, I do. I think you’re also seeing a lot of customers employing the cloud and the ones that are using the cloud will be in that space first, whereas larger organizations tend to do more traditional IT.

Romi Randhawa: We feel it’s more geographically segmented. Look at the Bay Area, it’s a savvy client base here in Northern California. I think 10 to 99 is a classic segment for an MSP, but I’m not too sure if it is here. I think it’s more in the Midwest, where it’s not so savvy a clientele. Here, you can call a receptionist and she would know how to troubleshoot a PC, she would at least get through the level one support herself before she opens up a ticket.

Next: HPM’s SMB Sweet Spot

RR : Here in the Bay Area, I think the most important space for us is 100-plus. The sweet spot for us is anywhere from a 150, 200 to about a 700, 800 employee base because they are the ones looking to consolidate and virtualize their environment. They are actually looking for enterprise gear but also for a local service provider to come in and put it all together for them.

And complimenting HP, they’ve got a pretty clear vision and going forward, it’s getting clearer and clearer, that, ’Hey, we want to be channel-led in that space, as long as you have value you can bring to us.’ So if you don’t have any value that you bring, then HP’s going to maybe bring another channel partner in, because they’ll still want to go through channels in that space.

So there are regional variances. Are there also variances within verticals within the SMB world?

RR: Not much. Take Paul as an example, a credit union. When they wanted to consolidate and upgrade their storage infrastructure and their servers in an Exchange environment, that’s pretty much a similar case across all SMBs, the same applications, etc. I’m not sure we need to verticalize it. From a product perspective, SMB should be a vertical on its own.

MK: I would say there are some verticals where different solutions do become important, like health care, where they’re looking for HP solutions but wrapped around some of the IT software associated with things like electronic medical records and things like that.

RR: And there will be specialized resellers doing that.

MK: Right.

I think we should take the opportunity to congratulate you, Romi. You’re the new president of the SMB Advisory Council -- what are some of your goals?

RR: Thank you. I’ve been on the council for about six years and HP has evolved quite a lot in six years. One of the things I would like to change is I would like to mix the members up a little bit, so we have every view represented, so we can get more feedback from each view specifically so we can get a little better.

And second, you know I take my owner hat off and I look at 16,000 partners [serving SMBs in the U.S.] and I don’t if they’re getting our message. I don’t know if we’re getting through to them. Look at the [HP Americas Partner Conference], we had about 500 or 600 partners at that event. And how do we take that message down to the thousands of other partners and say, ’You know, HP’s looking to align with channel partners as long you can bring value to the table, as long as you can bring something that don’t specialize in and their not intending to hire people for.’ How do we make them grow with HP and how do we get HP more market share amongst all those other partners who are not using HP today?

Next: Simplifying Business With HP

Sometimes when you talk to the very small partners and I think Mark Hurd has said it, that HP’s scope is one of its great assets, obviously, but it also means that HP does so much, has so much breadth and scope across business units that it can be difficult to deal with one single point of contact. And maybe the smaller partners have trouble with that. Is there anything that can be done to make it simpler to work with HP?

MK: Yes, that’s one of the fundamental focuses of the council and with this new rotation we’ve announced today, it accomplishes a couple things. First of all, it accomplishes what Romi wanted, which is let’s make sure we get each view represented. So we’ve got printer guys, we’ve got laptop and desktop guys, we’ve got server-storage, and we’ve got guys who specialize in services and all this stuff.

But we also brought on some very small partners with small amounts of revenue, not doing a lot of business with HP, specifically for this very reason. We’ve got these large integrated partners of HP that have been with us for years, who are loyal like Romi, who helped us with our more strategic plays.

Now we have some of these smaller partners who are coming in and being able to say, ’This is what I find difficult about working with you, here is where I would love to see something happen with HP.’ So I think we’ve made tremendous progress in terms of the last 12 months and how we’re trying to dig deeper into that lower part of the partner channel.

At APC we had members of the Advisory Council speaking to other partners and trickling that message down. And we’re also heavily leveraging some of the distributor networks to go out and proliferate our message that way. Like you mentioned, we are a very large company and we have a lot of different programs and practices, so it is hard to get to that long tail of the channel, but it’s absolutely a very strategic focus for us to be able to get to that long tail and make sure they know what programs we can offer them.

Well, it seems like the smaller partners might be able to recognize that part of their value-add to their customers is that they can run interference for HP and bring it all together.

Here’s a question for Paul -- it always must be a dilemma, where your company is moving towards or has moved towards being as you’ve said an all-HP shop, and there’s great benefit in that in terms of simplicity, but at the same time, there’s always a desire to keep your eyes open for other vendors who might have a better offer. How do you keep that balance as you assess technology and procure it and do what you do?

Paul Morris: Sure. We ended up being almost exclusively HP by accident. When we looked at the different options for storage, for servers, for desktops, in each of those instances, we looked at all the technologies that were out there. And individually, it made sense for us to go with the HP solution, technically, strategically and from a cost perspective.

Next: Flying Into The Cloud

PM : In the end, we ended up being an HP shop as it turns out. But we will continue to look at the different technologies out there. That being said, we’ve been extremely pleased with the partnership with both HP and HPM. Often times, with manufacturers, they’ll get a channel partner in there and you’ll work exclusively with them and if you need to go beyond that, there’s no one there. We found with HP, there is someone there.

So if we need to reach out beyond HPM, and there’s still additional knowledge we need, we’ve got HP backing it up and that’s been critical for us.

Romi, regarding the cloud, you said 12 to 24 months is when you see that the cloud may be moving to a next level. What’s happening in the cloud at that time?

RR: Here in the Bay Area, we work with a lot of start-ups who want to sell their services through the cloud. We see the cloud as an opportunity for us to give them the infrastructure they need. Even if they’re start-ups of just 40 or 50 people, they’re actually looking to create an infrastructure in the cloud.

We see a lot of that happening today. I think you’re going to have to consolidate some of those companies to get a clearer picture of what exactly this is going to be. I think it’s going to be about non-critical applications, maybe some third or fourth applications being backed up in the cloud. That sort of thing is going to move towards the cloud in the next 12 months or so as people become more comfortable with it.

I think as the market consolidates, as it shrinks, and it will shrink, you’re going to have a clearer picture of who’s offering what and what cloud infrastructure is going to look like.

HP itself has a lot data center infrastructure, so what about hosting some of these cloud ISVs with HP’s data center capacity?

RR: It’s being talked about as we speak. The HP cloud strategy team has approached us and other resellers and asked, ’Hey, would you be interested in reselling if we became that kind of provider?’ So there’s been a lot of talk going on and a lot of feelers being sent out to the reseller channel and the hosters to see if we can take advantage of such an approach and still make some money, and maintain some of our clients so they don’t go out and go to these third-party cloud providers.

PM: I think we are within a 12- to 24-month timeframe for people to really grasp the cloud and take advantage of it. We’re looking at cloud opportunities, but again, not for our primary applications. I think there are still two main concerns, security and availability. You’ve got to be secure and you’ve got to be available. People aren’t ready to trust that cloud provider to do that. They’d rather have that control. It has to make strategic sense with, right now, minimal risk.