A Conversation With HP's Leo Apotheker

Meeting Leo

HP President and CEO Leo Apotheker is moving full steam ahead with a new strategy to push the world’s largest IT vendor into position to take a major role in the cloud computing, connected devices, software and services markets. In a recent interview with CRN, Apotheker discusses his view of HP’s channel, the role partners will play in cloud computing and how his software and sales backgrounds will help shape HP’s new direction. Here are edited excerpts of the conversation.

You've been meeting with HP partners. What opinion have you formed of the HP channel?

It is no secret to you that our channel partners are a huge asset to HP, and I had the opportunity to reconfirm at every meeting how important the channel business is and how important the channel business will remain for HP.

I heard good feedback from our channel partners. They actually really enjoy working with HP, which is good. Like in any relationship there is always something you can improve, and that came out as well. The first message I wanted to convey to them is that, for HP, the channel partners are a strategic asset and we will do whatever we need to do to make sure that they have a great future with HP.

In light of your software background with SAP, talk a little about your future vision for HP and its channel partners.

Let me just point out that HP already has a very, very powerful software portfolio. Just take the security portfolio that we have which is extremely relevant. As I pointed out to the partners in our discussions, security is top of mind of everyone on this planet and it is growing exponentially. I also told our partners that I believe that their business model needs to evolve over time and should move more toward providing solutions to their customers so that they can broaden the kind of business relationship they have with their customers. Be it vertical or be it horizontal, that is up to each partner to decide what they would like to do.

Where will HP's direct sales force play compared to where partners will play?

HP has a pretty large footprint. That doesn't mean that HP knows how to do everything. Even though we have a very large services organization, that doesn't mean that we have a granularity everywhere, all the time, for every type of possible service that a large enterprise could need or would need. That is obvious complimentary that we have with our channel partners. It could be a [geographic] play. Some of our channel partners actually create additional specific [value] on top of our solutions that we could actually provide to these large accounts as well. In some cases, it is conceivable that we could be a channel for our partners. Why wouldn't that be the case as long as it makes sense for everyone? (continued on next slide)

(continued from previous slide) ... The point of this is: it is like everything else in life if you have an open dialogue and if people are pretty clear on what is happening and what the intent is of all parties concerned it works really, really well. As I said to some of our channel partners, at the end of the day, we should never let an occasional friction that might be happening somewhere in the field because someone did something that someone else didn't like. That is why we talk. That is why we communicate. We should not take an occasional isolated event and extrapolate a change in strategy or something. We should never go there. That is why we talk. That is why we engage. That is why we communicate. And even in very large accounts, where there is a pretty massive presence of the HP direct salesforce, there is space for our channel partners.

Your predecessor added a lot of direct salespeople. Will you continue doing that?

We will continue doing that. But they are targeted to a very specific segment of the market. And by the way, that is not where our channel partners [play].

You reinstated employee pay increases. Talk about the direct sales compensation, the channel compensation and how they are aligned.

I actually felt it was really important to give people that raise that they were expecting, if only because, I believe in performance and pay for performance in a performance driven company. Now we had a pretty good year. So there was no reason [not to give employees raises]. On the contrary. If we really believe in performance, then we should walk the talk and give people pay for performance which is exactly what we did.

The compensation of the direct sales force ... is always done in such a way that the pricing structure of how they get compensated on this doesn't discriminate against the channel. So at the end of the day, it is very hard to align compensation for one or the other because they really don't sell the same stuff. And they shouldn't actually be measured in the same way.

Can you provide some guidance to partners on HP's services account engagement strategy?

We had some really deep conversations with some partners on that topic. I made it very clear to our partners that in the world of tomorrow -- the cloud world -- there will be a really great opportunity for our channel partners, provided that they actually adjust a little bit of their business model as well. If they have an on-premise business model that is only based on servicing yesterday's world, they are going to have a problem. Not because I want to cause them a problem, but because the market is going to move away from them [Laughing] … As I said to our channel partners: If we discuss cloud, if we all believe in cloud, if we see cloud as one of the main market moving things in the future, well then you are going to have to adjust your business model to the cloud as well.

What's your message to partners around cloud?

I have said this many, many times -- that cloud is different for everyone and the pervasive business model of the future for the cloud is going to be hybrid clouds, some private clouds, some public clouds and whatever … What is going to change is the engagement model that people will have when they are going to have to deal with the cloud. That means they need to have a more service-based business model. My advice to channel partners [that I have met] was: Guys, look at your business model, look at the value-add that you provide, see how you can scale this, with the help of the cloud. Because if you don't then you are going to end up doing maintenance and not future business. It might take ten years. It might take five years. It might take three years. It is a different discussion. I don't know [when].

So how do partners have to change their business model to make sure they are going to work with the HP of the future, the HP that you are building?

Actually can I say this slightly differently, if I may? They should change their business model so they work with the customer of the future, not with the HP of the future. Both HP and the channel partner would like to service the customer. At the end of the day it is a customer-centric world out there, not an HP-centric world, and I think they have to adjust to that. So what are the major things happening: talk about mobility, talk about the cloud, talk about all of these various intersection points. That is where the future for our channel partners needs to slowly and gradually move towards too. Because at the end of the day that is what the world will want from them.

Will HP have a cloud computing channel program that empowers partners to bring these hybrid clouds to market? How will you position HP against the VCE coalition?

We will make the positioning very, very clear. Our channel partners will have a very clear understanding of what the strengths of our positioning is. I think there will be a certain number of programs that we will build to support them.

I will give you one example. I happen to believe it is a huge opportunity. We announced what we are doing with WebOS on February 9. And if you listened carefully to the presentation, we talked a lot about ecosystems. An ecosystem is not just consumer driven or fun apps; an ecosystem can also be enterprise or business apps. I would be delighted to see channel partners of HP who have some logical expertise or whatever bring some of their knowledge and create vertical mobile apps for WebOS. That would be really cool.There is a whole program that is structured for that.

The call to action for partners then is a call for innovation from the partners. What is your channel vision?

My channel vision is to turn the partners into a proactive force that innovates business models, go to market models, service models, where we all share the overriding objective to make the channel and HP to truly delight our customers.

Will there be new attach rate incentives to get them to carry the full portfolio?

I think that what we need to do is provide all the channel incentives that we need to provide to encourage people to open their minds. That is way more important because I do count on the entrepreneurial spirit of many of our partners. At the end of the day it is their decision and then we will help them be successful. But where I come from at the end of the day it is the customer need that should drive behavior. If we all agree, just to hammer on this point of security, because it is an obvious one, security is such a huge issue, then help me understand why a partner would not want to do security -- because he doesn't want to do business?

Well they might be doing security with another vendor.

But the point is I think we have a very unique offering. Our job is to make sure that people understand that our offering is better.

You have talked a lot about being a global citizen.

The press talks about it. I am just who I am.

What are your plans with growing, emerging markets?

As I have said on numerous occasions, personally I have a real issue with the term ’emerging markets.’ I will tell you why. It is hard to qualify a country that has a 4,000-year history as emerging. It is not like they kind of popped out of the ocean, 'hello I am here.' It is the one country where people who are literate can read the original text of the first written text in Chinese in the original version. They might not understand every Kanji character, but they they can still read it, that is pretty impressive. That is why I have an issue with it. So fast growth markets are top of mind of course. That is an area where HP is already pretty active, but wants to be way more active, which is why, by the way, when I go there ... I never miss the opportunity to at least meet once with a group of partners.

What do you want your legacy to be here at HP?

Let me put it this way. I just started, so it is a little bit hard to talk about legacy except I really have the desire to make sure that HP is the world's best company. As I said to the senior leadership team the other day, the kind of company where you would want your children to work at.

What's the biggest misconception of you?

I know that many people in the channel were afraid that I was known to be direct sales, proprietary, get-out-of-my-way kind of a person. That is actually totally not true. Even at SAP where I did build probably the world's best direct sales force, it was hugely leveraged by channel partners. Hugely leveraged. Without the channel partners, SAP would have never become what it became. Not even close. So I have always worked with channel partners, and if I could use this opportunity as I am talking to you, I want to convey the message again and again and again, I embrace channel partners in any language you would choose.

One of the big things partners are concerned about is will you be involved in account engagement like your predecessor was?

Yes. I am a sales guy at heart. I carried a bag. So I sympathize with these people. So they can call. And I told them that in all of our meetings. Here is my number. Here is my email. If you need help call. So we will do whatever we need to do to help these guys sell.

The culture that you are building at the channel and HP. What is the ideal culture you want for HP and its channel partners?

Customer centricity. It all boils down to customer centricity.

Check out more of CRN's exclusive coverage of Leo Apotheker and HP.