HP ProCurve Doubles Channel Spending Amidst Growth Spurt

Hewlett-Packard's ProCurve Networking by HP division will be doubling its investment in its channel during the coming fiscal year, which it is ringing in with the launch of a revamped partner program on November 1.

"We're investing in our channel program to reward partners by performance, certification and product mix. We're doubling our investment in 2008 in terms of the money we're putting in the market," said Wenceslao Lada, vice president and Americas general manager at HP ProCurve, during at the vendor's ProCurve 2007 Power Through Partnerships Program, a solution provider conference held last week in Half Moon Bay, Calif.

HP ProCurve this year invested four percent to five percent of its total revenue in its channel; in the coming year, the company has earmarked 10 percent of its total revenue for channel spending, he said.

With the additional investment and new program, HP ProCurve, Palo Alto, Calif., aims to provide channel partners with a fairer reward system, more co-op marketing funds and an improved process for handling sales leads, Lada said. The company is also changing its policy around two-tier distribution, now requiring all partners to buy through distributors.

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"We are a channel organization. We don't sell direct, so if you are not successful, next year there is no ProCurve. It's as simple as that," Lada told channel partners during a keynote address at the event.

The channel changes come as ProCurve is adjusting to keep up with sales growth, Lada said, noting that the company's goal for fiscal 2008 is to increase revenue by 35 percent compared to this year. Partners have seen some challenges working with the vendor as a result of the growth, some of which the new program will help to address, Lada said.

"They've been growing very quickly, so they have challenges in the field. They've got some work to do on the training side, and they have to get their name out there as a network alternative or option against Cisco," said Don Wisdom, president of Datalink Networks, a ProCurve Elite partner based in Santa Clarita, Calif. "HP realizes that to grow, they have to make their partners successful."

The company also continues to broaden its product portfolio, a move channel partners said is critical in order for ProCurve to position itself against rival Cisco Systems. The vendor recently launched its first core network switch to carry a lifetime warranty.

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On the channel front, HP ProCurve until now has provided rebates to partners that hit certain sales targets, offering the same growth targets to both regional and national VARs. That methodology created an inequity because it didn't take into account how much harder it is for smaller partners to reach large sales volumes.

"We had a scale that you got x-percent if you achieved $1 million in sales, another x-percent for reaching $3 million or $5 million. But if you're national, making $5 million is simple. For a regional VAR, it's much more complicated," Lada said.

With that in mind, Lada has created two separate scales, one of regional partners and another for national partners. "From a percentage standpoint, you can be at the top of the regional scale and be making more money than someone at the lower end of the national scale," he said.

At the same time, the company has increased the rewards partners will get for hitting the revenue targets. Solution providers used to earn rebates ranging from one percent to three percent depending on the target. Now the range scales from three percent to eight percent.

HP ProCurve solution providers attending the event said the new separate scales will help them compete more effectively against large partners.

"It levels the playing field and allows me to decide what margins I'm willing to give up," said Dan Miller, data sales manager at Five Star Telecom, a ProCurve Specialist partner in La Crosse, Wisc.

HP ProCurve is also changing its distribution strategy. Effective Nov. 1, all channel partners will source ProCurve products via distributors, including partners that currently are sourcing directly from the vendor, Lada said.

Just under half of the vendor's 110 top-level partners have been sourcing directly from ProCurve, while the rest buy through its distribution partners, which include Ingram Micro, Synnex and Tech Data.

HP ProCurve began transitioning those partners over to distribution in August, Lada said. "Unfortunately there are partners who have not been buying much through distribution, so they have to establish new records and new relationships with them, but we've been working to help them do that," Lada said.

By sourcing through distribution, channel partners should see improved product availability, have access to drop shipping that HP can't provide and see more financial incentives and more flexible payment options, Lada said.

Partners that source through distribution can also more easily pull together solutions that include pieces from HP's technology partners, such as Mitel Networks on the VoIP side or Fortinet on the security front, Lada said.