CRN Exclusive: HP's Whitman On Enterprise Group Issues, Street Fight With Cisco And EMC

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Hewlett-Packard CEO Meg Whitman, who will address channel partners at CRN parent company UBM's BoB (Best of Breed) conference in October, spoke with CRN about the management shakeup in the wake of disappointing enterprise group sales, the street fight with Cisco and EMC, and her commitment to personally helping partners close deals as she moves to reignite sales growth.

Here are excerpts from the discussion.

What kind of changes can we expect with [HP COO)] Bill Veghte moving to take the helm of the enterprise group?

Let me say what changes you won't see. He is very committed to the channel. So you will see no change in our strategy around our commitment to the channel. The message that I delivered at the last Global Partner Conference will be reinforced and maybe amped up even more by Bill.

Bill is also a very experienced go-to-market executive. He ran Microsoft North America. So, he deeply understands that we need to be easy to do business with. Our invoicing, our pricing, our sales specialists and solutions architects that we can deploy to help the channel are very much on his mind.

Talk about Bill's plan around demand generation and lead generation with regard to the partner strategy.

This is the other thing that is on Bill's mind, which I think the channel will be happy to hear: We understand that part of our role has got to be demand generation, lead generation for the channel to follow up on. So whether it is our digital marketing, our call centers or the work that we do around the globe, we need to make sure that we are generating leads and helping the channel increase their business.

While that has always been part of our role, I think quite frankly that hasn't been as much of a focus as it will be under Bill.

Will we see any compensation or go-to-market changes with Bill coming in to run the Enterprise business?

I think we laid out pretty clearly at the global partner conference that we want to be a channel centric company. [HP Executive Vice President of Strategic Growth Initiatives] Todd [Bradley] (pictured) is focusing on [extending the global reach of] the channel. I think in many countries around the world we have actually gone as far as a hard deck. I am encouraging people to be super clear -- these are the accounts we need to take direct and these are the ones that we want to take [to market] with the channel. I have actually gotten good feedback: I rarely hear now some of the noise that I heard two years ago about lack of clarity, HP taking channel partner business. So really we err toward the side of the channel.

How is HP helping the channel drive sales growth?

I think we have not invested quite enough in our technical resources to support the channel, whether that is sales specialists or solution architects.

Listen, when we are selling 3Par or [HP] networking, which actually are [both] big channel businesses, over 90 percent of those businesses go through the channel. Those are, in the end, a technical sale that is a street fight with EMC and Cisco. And, we have to arm the channel to win in the street fight, because there is a huge value proposition for their end customers. But listen, Cisco and EMC are pretty well established. You know no one ever got fired for buying Cisco. But yet it is incredibly expensive relative to a simpler, more elegant solution from us. So I think that technical selling expertise and the ability to support the channel on hand-to-hand combat are important.

Is the networking sales opportunity low-hanging fruit for the channel?

Given the economic situation in which we find ourselves particularly in the United States, the days are over of ever escalating IT budgets in small to medium and even large businesses. So CIOs and [Business] owners are looking for ways to save money without compromising quality, and HP Networking is a very obvious place that people can look for savings.

When I came to HP, we took all the other competitors' gear out of HP. We run all of HP's technology backbone, which, as you can imagine, is enormous because we are the 10th largest company in America. It all runs on HP Networking. It all runs on HP Storage without a glitch. And, we have saved a ton of money. Those are the stories that we need to tell because everyone I know who has switched at least part of their data center to HP Networking is thrilled to death.

Is igniting HP Networking sales growth simply a matter of account engagement and focus?

I think the partners have to decide that this is an area of growth for them, that they will make good money doing this. And then, they have got to go out with HP's help and convince customers that this is the way to go because it is a much better value proposition for the customer.

How much of the enterprise group execution is related to will-to-win versus long-term execution issues?

It is hard to measure will to win. Our go to market has many pieces to it: One is coverage -- how well are we covering the partners? How well trained are our partner business managers? Do we have the right specialists and solutions architects married to the partners? Do we have the demo units ready to go? Are we able to do POCs [proof of concepts] for partner customers? Is the demand-gen engine up and running and killing it? And then we have to be willing to be aggressive. I think the good news is we have moved the aggressiveness needle over the past two years.

I was with [HP Senior Vice President Enterprise Business] Rich Geraffo's U.S. sales team yesterday and they are fired up. I mean they are not happy with their results. They realize they have got to do better.

Talk about changes aimed at driving sales growth.

We are putting more emphasis now back on the [product] category managers who were very instrumental in helping the partners make pricing decisions. So I think we are making some changes that are broader than just a compensation program, which was absolutely a necessary thing to do, but we still have got work to do, I think, to bring our go-to-market up to where it is befitting of a company like HP.

Is the channel and HP not doing a good job in the hyperscale server market?

This is a market segment that we call service providers. And, it goes from the big telcos all the way through Google, Amazon, Bing at Microsoft, eBay, Yahoo, PayPal, Baidu, Tencent, all the way down. We call them tier-one, tier-two and tier-three service providers. I think, at the top of the food chain there, Google is likely to continue to make their own servers with the ODMs [original design manufacturers] in China. Facebook has adopted Open Compute; they do mostly their own (servers). But, it is only the top six or seven that are big enough to actually do this on their own. The rest of the tier two and the tier three need HP, and they actually need partners. It is a much more customized selling process. In other words, basically what these big hyperscale customers are looking for is they want to run one app on a highly tuned server.

Talk about the sales dynamics around the hyperscale server market.

It is a custom sale, and frankly we can't afford a lot of selling resources on it so we have to have a very streamlined team that goes in there to say 'Okay what are the engineering requirements? Where the heck are we going to build it? And then, the biggest part of this is actually the logistics of getting it there when they need it.

So this is an area we have to do better at. I think there are opportunities for partners particularly in the tier two and tier three. This [system design] is literally down to the screw that you have connecting the left and right plate. This is how detailed it is. So I think there is an opportunity. We are reorganizing ourselves to better compete here.

How does HP Moonshot change the hyperscale server market?

In the end here, the real breakthrough is Moonshot because of the way we are doing hyperscale today. The way the industry is doing hyperscale today is sort of taking old technology and marrying it to a new way of buying. In the end, Moonshot, with its ability to drop in cartridges that are totally focused on one app, is going to be the new way of doing business. And, I think there is a lot of opportunity (for the channel). I mean it is going to be a reset, a complete reset of the entire market. And, that is an opportunity that the channel can absolutely sell all day long. The channel will have a little harder time stripping out every component to completely tune a [hyperscale] server for a big customer.

Can you talk about HP Moonshot ramp to revenue?

This year is just going to be a relatively small amount of revenue. Most of the customers have POCs [proof of concepts] in their labs. They are working it out. And, what I know is I can't send a Moonshot server in without [technical sales resources and] support. There have to be technical resources to go with it. Next year we expect a fairly rapid ramp in the scale of HP new product launches. Listen, we are excited about it. We need to build the ecosystem. We need to train the partners. We have had very good interest in it.

Is the five-year turnaround plan on track?

I would say we are on track. We are about where we thought we would be. In these turnarounds, there are businesses that do very well and then there are businesses that haven't quite turned the corner. Sometimes, the businesses that do well change from quarter to quarter. It is not linear and can be a little bumpy, but I feel really good about where we are. I think the things that are surprising on the upside are the responsiveness of HP people. Customers, as I have said many times, want HP to win. I think we have had a good response from the channel to the changes that we have made here at HP, and we are going to continue to make sure that we are the best partner that those channel partners can do business with. That I think is really quite good.

Talk about some of the turnaround challenges.

Some of the challenges are in our go-to-market. I was disappointed in the enterprise group performance this quarter and so obviously made a change. And, I think you are going to see that come back on strong.

It is really interesting: Last year, I was terribly worried about our services business. Now, I am not so worried about our services business. When I first came in, I was worried about our printing business. Think of it as a family of children: Not all the children are doing well all at the same time.

Can you give us some insight into how the channel performed in the quarter?

I don't think we went public with channel vs. direct, but what we do know is we believe that the new channel compensation program that we put into place this spring is actually starting to pay dividends. The channel partners would have gotten their first check based on their performance in the quarter, and we got a lot of 'Wow! This is really great!' As you know, the channel cares about how much money is in the bank account at the end of the month or the end of the quarter, and I think we are getting some very good feedback in that regard.

I was at CDW last week. They were very complimentary. They had a lot of their customers there who are very complimentary. I did the Nth Generation Computing customer event and they had 400 customers there. They were very positive.

How are you feeling about the channel changes HP has made?

I am feeling good about the turn that we are making with the channel. And by the way, Bill Veghte is an incredibly channel-centric executive. He loves the channel! He has nearly two decades of experience with the channel from his years at Microsoft. So I think you ended up with an even more channel-centric focused executive and someone who is very deep from a technology perspective.

You are addressing the BoB [Best Of Breed] Conference in October; what do you need from the channel to accelerate sales growth for HP?

We need them to be an extension of us. We need them to know the products as well as we do, to take their customer base and say where can HP products make a difference to those customers. They need to provide feedback to us if we are falling behind or not competitive. I want a constant two-way discussion between the channel and us.

They have a great opportunity because all of the channel's customers face the same challenges big companies do, which is the shift to the new style of IT. And, the channel partner can be their guide on that journey with HP products.

Any constructive criticism of the channel with regard to areas you feel are not up to snuff?

Listen, I hold the channel in incredibly high regard. These are independent businesses that are fighting everyday to improve their profitability. They do eat what they kill. I mean I have huge admiration for that.

I think they are missing an opportunity in 3Par. 3Par grew 87 percent year over year. The mid-tier storage product is on fire. I think they are missing an opportunity in networking. I think they are missing an opportunity in our rack and tower [servers]. This is a transactional business. We ought to be selling more rack and tower [servers] through the channel.

So I think they could be just a little bit more aggressive looking at things, understanding the full Hewlett -Packard portfolio and looking for opportunities, to not cannibalize their existing sales, but actually grow their existing sales.

What is biggest challenge with regard to partners driving an end-to-end HP solution across the broad and deep portfolio?

I think we need to do a better job on sales plays. If I have half an hour with a channel partner, what are the five things I want to talk to them about: Obviously, I think converged infrastructure would be one; our cloud offering would be another. We have to package our products into solutions that our channel partners can sell pretty easily.

The software-defined data center: What does that mean for small to medium-sized customers? So, I want us to get a lot crisper about the five or six sales plays that we are going to run and then make it dead simple for partners to sell.

Talk about what you are personally doing to help partners close deals.

If a partner needs help closing a deal, I tell them to call me. We are committed to helping them close these deals. I probably talk to 30 or 40 customers a week on behalf of the channel. They say 'Meg, would you mind calling?' It is actually quite effective because their customers keel over when I get on the phone.

I am quite happy to drop everything and call customers, as is [HP Enterprise Group Executive Vice President)] Bill Veghte and [HP CFO] Cathie Lesjak (pictured). We are happy to get on the phone to chat with partner customers because it makes a difference.

So, it is super important. If the channel doesn't grow, HP doesn't grow. And, we should be the very best channel partner as we were for many years. So, we have to go the extra mile to sort of earn our stripes every single day.