HP Moves To Cut Out Channel Conflict

What could turn out to be a key step forward for Hewlett-Packard's commercial and SMB solution-provider partners, the company is instituting a new sales-engagement model aimed at removing key conflicts that now exist among channel partners and direct HP sales reps who sell PCs, industry-standard servers and some storage products.

The plan will enforce new rules that delineate who owns customer relationships and sets up a structure to penalize sales reps who go after accounts where a partner is already engaged. As part of the new policy, HP has established a named account list in which the company will be the lead sales interface with customers, though that doesn't preclude partners from being brought into such accounts for fulfillment and other services, said John Thompson, vice president and general manager of HP's Solution Provider Organization (SPO).

HP has also refocused its call center to handle inbound orders only, with part of the call center dedicated to supporting channel partners, Thompson said. The call center will now report into HP's SPO, whereas in the past it reported into HP's Customer Solutions Group, which the company has since eliminated as part of its broad restructuring earlier this year.

The overall new sales-engagement model, Thompson said, is to have clear rules as to who can play where. The new sales-engagement policy has been in the works for more than a year, and seeks to draw on the success of a similar plan last year, when HP turned over 250 of its named accounts to enterprise partners and found that much of the channel conflict there diminished.

The latest effort, while not inclusive of all products, will cover key areas where HP partners have seen conflict, Thompson said, describing the new policy as the biggest change implemented since stepping into his current position a bit more than a year ago.

"We think it is going to change the nature of the partner ecosystem," he said.

HP partners have bitterly complained about channel conflicts for numerous years, but several partners and industry observers were cautiously optimistic about HP's latest effort.

"HP has put these poor partners on a bit of a roller coaster and there's cautious hope here," said IDC analyst Janet Waxman. "They are saying the right things and moving in the right direction, but it will boil down to execution and time."

How much time is an open question, she said.

"I think that the most important thing is that HP continues to be consistent, execute flawlessly, and just stay the course."

Questions still remain, though. HP would not disclose how many named accounts it will identify, but some said they have heard anywhere from 750 to 1,500. If so, that's a small percentage of the 20 million small and medium businesses in the United States this program is targeted at. And printing and imaging products were not added to the mix because Thompson argued that there is little channel conflict today in that segment. Some partners, however, said it would be nice to have that included just the same.

Overall, channel partners also welcomed the move.

"This is really a pro-partner initiative," said Laurie Benson, CEO of Inacom. "It's a huge step in the right direction; it shows they've been listening and they are addressing what it will take to grow our HP business. Instead of HP saying they will grow their business themselves, they will make it easier to do business with partners."

Among other things, it gives partners the choice of using the agent-referral model, where partners receive fees for referring customers for buying HP products directly. Or partners can take the option of going through distribution, taking inventory and trying to do better from a margin perspective by wrapping software and services.

"Now I know if we sell our value hard enough to a client, we could make 7 or 8 percent out of the sale," said Romi Randhawa, CEO of HPM Networks, an HP partner. "On top of that now, I'm going to get my MDF dollars."

Under the direct agent model, most fees have been capped at 8 percent, to many partners' chagrin.