New HP Storage Strategy: Two Channels, 'De-emphasized' Two-Tier Distribution

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Storage channel partners of the new Hewlett-Packard can expect to go through a transition period as HP and Compaq Computer become one.

During the transition, storage product channels will become segmented and two-tier distribution will become less of a factor in getting the products to clients.

HP will work to embrace both the "classic HP" and the "classic Compaq" storage solution providers as the two companies come together, said Mark Lewis, a Compaq and Digital Equipment veteran who is now the head of worldwide marketing and solutions for the new HP's Network Storage Solutions Group.

The company's solution providers will be divided into two groups--the enterprise channel and the commercial channel, Lewis said.

The XP family and the Enterprise Virtual Array (EVA) high-end arrays, the upper portion of the VA line, and all of the EMA and MA lines, will be sold through the enterprise channel, Lewis said.

The MSA and entry-level VA product lines, plus storage devices, entry-level autoloaders and entry-level SAN equipment will go through the commercial channel, he said. For such products, HP plans to align its storage sales strategies with the company's overall commercial channel strategy, which includes printing and imaging products, industry-standard servers, and so-on, Lewis said.

"We're going to take very much what I would call a follower approach into the commercial channel with respect to the other HP products," he said.

Enterprise channel partners will have stricter training and knowledge requirements than those in the commercial channel and will be given an appropriate amount of time to become skilled in those areas, Lewis said. HP expects its enterprise partners to be able to add value to the company's products with solution integration, pre-sales support and post-sales support.

"We will obviously set expectations around those partners getting current with the new technology and wanting to sell [our enterprise line," he said.

Lewis said he is not sure how many enterprise-class solution providers were working with HP in North America before the merger, but said that Compaq had between 150 and 200 such partners. With overlap between the HP and Compaq solution providers, overall the number of partners for the two today is probably less than double the old Compaq figure.

While HP is open to working with new enterprise-class solution providers, the company does not have a specific number of partners in mind that it wishes to recruit or cut, Lewis said. "I would assume that . . . there may be a few where there's market overlap, [so I would expect a modest reduction," he said. "That's not something we're going to drive for. We don't have a target to reduce numbers."

The heritage HP and Compaq storage certification programs will be combined into a single "storage university" which will feature a strong certification testing capability, Lewis said. "We will modify the content [of these programs and move forward with virtually identical programs from what we have today.

HP will be looking to ship more products direct to solution providers than in the past to decrease the supply chain and cut costs related to handling physical products, Lewis said. Having a lot of inventory and related logistics is of no value to the channel or to HP's business model, so the company will seek ways to keep product distribution issues at a minimum, he said.

As a result, HP plans to start to "de-emphasize" the two-tier distribution model in North America. "We want to make sure we're really adding value there," Lewis said. "So we are encouraging distributors and the larger folks to look at where they are going to resell and what markets they are going into because . . . we have a very efficient supply chain that can now fulfill in very short order cycle times," he said.

As a result, HP will unequivocally ship fewer physical products through its distributors in the future, Lewis said. In terms of providing certification, training, pre-sales and post-sales technical support and other value-added services, however, the company will continue to rely on its distribution partners, he said.

Kush Hathi, president of SoftNet Solutions, a Sunnyvale, Calif.-based Compaq solution provider, said he likes the product road map and HP's plans to extend Compaq's EVA platform across the entire storage space from enterprise to midrange to entry-level clients. "I'm excited to be working with the new HP," he said.

Hathi said he will watch how HP works with two-tier distributors in the future. "Today, I rely on distributors for inventory," he said. "They give me the capability to get products to customers quickly without stocking a lot of hardware. I've been getting a lot of training and services from manufacturers, and as an organization we don't rely on distributors much in this respect. If HP can do a good job of shipping direct to us, that's OK. But our distributors are very efficient."

How solution providers interact with HP and its distributors could vary depending on the products, Hathi said. "It maybe makes more sense for the vendor to be closer to the solution provider on higher-end products," he said. "When I go on sales calls, the distributor never goes with me. The manufacturer does."

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