HP Execs: Partner Relationships Depend On Level Of 'Intimacy'

At Hewlett-Packard's Americas StorageWorks Conference in Houston last week, Jack Novia, senior vice president of HP's Customer Solutions Group, and Mark Gonzalez, vice president of enterprise storage and server sales for the Americas at HP, discussed the "hierarchy of intimacy" in channel relationships with solution providers and how it affects HP's ties with solution providers in an interview with CRN Senior Editor Joseph F. Kovar.

CRN: HP Chairman and CEO Carly Fiorina met with a dozen of your Elite storage partners at the Americas StorageWorks Conference. What did they discuss?

NOVIA: Some of the things we talked about were, how can we help them with executive support on their customers? How can we do a better job of helping them link to our demand programs? They had some great insight for us in terms of, as change in management occurs in the company in products and programs, how to utilize Elite partners as a sounding board ... We talked more about proactive management and how to help Elite partners become an extended part of our sales force.

GONZALEZ: It's all about intimacy. We've had a very good working relationship with Elite partners. They represent a very significant part of our enterprise storage business. Obviously, the first step was to make sure there is a predictability model between HP and our channel partners so they can feel confident that, if they made investments in opportunities, they would in fact have the opportunity to close the deals.

Now where they are, and where we are, is moving from a predictability model to an intimacy model, one that basically says, how do we create a seamless engagement between ourselves and our channel partners so that channel partners are viewed as a direct extension of the HP family--in the full sense of the word 'family.' For example, one of the things we talked about is that there are more accounts we will be moving from the enterprise space to our channel partners. And [another thing] we discussed with them is the process for how we're going to map our channel partners into the specific accounts. One thing that made sense was that, as we select the channel partners to be working with those customers, we're going to put a priority on the level of intimacy that exists between ourselves and those channel partners. For example, the 14, 15 or however many HP-exclusive Elite storage partners will get first dibs on such accounts.

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CRN: So the partners at the meeting were all HP-exclusive?

GONZALEZ: Yes, the ones that met with Carly were all HP-exclusive. [The intimacy model] basically says, you have different types of relationships with different people, just like you have different types of relationships with partners. Your most intimate and closest people are your immediate family, and then you have friends and acquaintances.

Well, for us, the Elite partners that are HP-exclusive, they are family. You don't have to worry about whether they will represent HP's best interests or not. They're 100 percent committed to our success, just as we are 100 percent committed to their success. The next level of intimacy is friends, and you can have very good friends. Our Elite channel partners that have decided to carry other product lines, we would consider them our very good friends. But obviously the level of intimacy is different because they have other [vendors] that they partner with. So they will, in a sense, be given the second level of opportunity to be mapped into accounts. And then the folks that you would just consider acquaintances would be those that you have relationships with, but they don't have the intimacy of very close friends or family. I think that's a good way to explain the hierarchy of intimacy that you have with different [partners].

CRN: How do you see your relationships with HP Elite storage partners going forward?

GONZALEZ: The goal here is to make sure there is no wall between us. That we function as if we're one organization ... If you really boil it all down, HP does about $50 billion a year through the channel. Working with the channel is in our DNA. If you compare that $50 billion we do in the channel to the competition, we do more channel business than IBM, Dell, EMC and Sun Microsystems combined. So for us, working with the channel is not a necessary evil; it literally is a part of our go-to-market model. It is the way in which we reach our customers. And it's becoming an increasing part of the way we reach our customers.

CRN: How many Elite storage partners does HP have?

GONZALEZ: About 50 ... We have expanded that concept into an Elite program that also includes our servers. So there is now an ESS [Enterprise Storage and Servers] Elite program for partners that have made similar investments.

CRN: When was that?

GONZALEZ: About six months ago.

NOVIA: The pattern here is that you get your arms around those high-quality partners that can deliver end-to-end capabilities. And if you step back and look at our ESS partners, there's probably a cross-hatch between them and our Elite storage partners.

CRN: For the folks below the Elite status, what can they expect from HP?

GONZALEZ: We want to make sure that we're very clear on what it takes to be certified and to be able to represent HP's products. One of the feedbacks we got from HP's channel partners is that they would value our making the process for certification training more streamlined than it was in the past and to work with them in a cooperative fashion so that, for example, they could minimize the amount of time out of the field [needed to] reach their accreditation. We have worked with some of the distribution partners these resellers are tiered to that have put together 'boot camps' so that within five to seven days, [VARs] can get several of these courses under their belts. And then they take a test at the end of the training and get their certification more quickly.

CRN: What is HP doing to protect the margins of Elite and other channel partners?

GONZALEZ: We are making sure that the partners that remain in the program are those that are truly committed to being successful in this business. So, for example, we have standards for removing people from the program. On a quarterly basis, we review our enterprise partners, and if they don't meet their revenue or certification training [goals], we will deauthorize them. And the reason we do that is to protect the margins of partners that have made the investment. Part of the goal in having a program like this is that there is integrity in the program. Partners don't mind competing. They just want to make sure they are competing on a fair and level playing field.

CRN: In the last quarterly review, how many partners did HP deauthorize?

GONZALEZ: We actually did not deauthorize anyone after the last quarter. We wanted to make sure that if any of the revenue bars that were not hit were the result of any of the problems with shipments that we had, it wouldn't reflect negatively on channel partners.

CRN: There have been difficulties with HP's special-bid pricing, with some folks saying it takes up to six days to get a price from HP vs. as little as four hours from IBM. Where is HP in terms of this issue?

GONZALEZ: We moved the empowerment for approving deals much closer to the people that actually work with our channel partners. [Before] there were different thresholds that needed to be reached depending on how aggressive the pricing needed to be. So there were actually too many people that were getting involved to touch the deal from an approval perspective.

We've turned down very few partner requests for pricing, and that was part of what we came up with. We were looking at the data and said, 'You know what? Most of the deals coming up, we approved them anyway. So why do we have so many people involved in making the approval if we're going to approve it anyway?'

CRN: What is the turnaround time now? I've heard five or six days.

GONZALEZ: That's not true. Let me give you an example. We have a meeting that we have literally every day--I think it's at noon central time--where every deal can be brought live to that particular phone call and instantaneously that decision can be made on the phone. So the longest it would take to get a turnaround would be 24 hours, because that call takes place every day.

It is something that we do track, just like every month we track who we lose to and why we lose. Quite frankly, the No. 1 reason we lose a deal in the channel is because the partner did not ask for the right price. It's not that the price wasn't competitive. It's that the partner did not ask for the right price. What that requires is that channel partners be very close to the deal and be involved very, very early in the deal so that they have the relationships in the account and can come back to us and say, 'Here's what it's going to take to win.'

NOVIA: There's a value to having our management team locally work on these deals more proactively. In a perfect world, you'd want a winning strategy developed by your business partners--and, when appropriate, calling in the HP management team to help size up that opportunity and close the deal. It could be a sales visit, it could be support that Mark [Gonzalez] provides on pricing or it could be all the above.

GONZALEZ: So that ties in with all of the investment we're making in growing the number of storage specialists we have in the field. HP is making significant investments in making storage specialists provide our channel partners with HP-badged folks who can walk in arm-in-arm with them and can say, 'Look, we are one team. We are 100 percent behind our channel partners.'

CRN: What's the situation with shipping delays to the channel?

NOVIA: Overall, from an enterprise product point of view, we're in pretty good shape for our Unix-based storage and NSS [Networked Storage Solutions] products. We don't see any major delays in those areas. We are shipping the backlog from the prior quarter in our industry-standard server space. The good news is that we've increased our market share by three points since last quarter. We are continually seeing strong quarterly demand, so our backlog is growing--and getting healthier.