It’s time for channel payback by Hurd and HP

By Paolo Del Nibletto

The last time I was in the same room with Hewlett-Packard Co. chairman and CEO Mark Hurd he basically put the channel on notice, telling them, “there is a new sheriff in town.”

That was just under two years ago. At Monday’s brief keynote address at HP’s Americas Partner Conference in Las Vegas, Hurd’s message to the channel was in sharp contrast to his statement of 24 months ago.

Times have changed certainly for Hurd and HP. Back then, the company was an US$80 billion player and today its revenues have surpassed US$104 billion.

Hurd gave the bulk of credit for revenue growth to the channel. In 2005, Hurd said he hated channel tactics such as when a partner might replace hard drives and other components in HP systems with cheaper, “second-rate” products from Taiwan, and then reselling the removed HP system components. Hurd also said he did not agree with a channel approach that used HP hardware as a loss leader and fulfilled system solution sales largely with other vendor products.

One of the things Hurd did was kill the unit centric compensation plan, which measured growth by units sold and paid out the same way to the channel, and introduced an attach approach that provides partners with more margin opportunities when they add on other HP products and services to the initial sale.

In turn, HP expanded its product portfolio so that partners could expand and enrich their total system sales.
During the past two years, HP partners have stepped up and generally improved their ability to sell the entire HP portfolio by attaching servers, storage, services and software to the sale. Margins went up as did customer satisfaction and suddenly partners are providing greater than ever value to HP.

Hurd said that, for HP, “the channel is oxygen.” I took this to mean that the channel is breathing life into HP. That is a great thing for HP, but is the channel likewise benefiting as much? Will HP help breathe life into their businesses so that partners can achieve similar success and growth?

One area of concern is in the way HP accurately measures channel sales for rebates. It has been slow at best and at worst forces the partner to fund large deals on their own.

Now it’s time for HP to become easier to deal with. Hurd has stripped out a great deal of administrative layers at the company and invested in new and improved channel resources.

However, a telling sign that things may not have improved enough happened during Hurd’s keynote. He asked the audience, which was made up of more than 1,000 channel partners along with HP executives and press, whether HP was easier for them to deal with. The silence was deafening and clearly it was an awkward moment for Hurd.

It is a wake up call for better and quicker communication, faster turn around for quotes, more predictable business arrangements, lower channel conflict – especially in the U.S. – and the delivery of more services business opportunities to solution providers. Not to mention getting back end rebates earlier in the sales cycle.

Maybe the channel is now the new sheriff in town.

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