Adapting To A New HP

Hewlett-Packard Chairman and CEO Carly Fiorina is preaching unity. Armed with a new channel strategy that melds its commercial and enterprise units into a single channel organization, an additional $50 million in funding, and the launch of new programs to team with partners on services, Fiorina is set to take on HP's one true technology rival, IBM.

Stressing that HP solution providers account for more than two-thirds of the company's annual revenue, Fiorina vowed last week at the vendor's annual Americas Partner Conference in Los Angeles that HP would forge tighter alliances with partners. The reason: HP can't reach its strategic goals without working closely with the channel.

In an exclusive interview last week with CRN and sister publication VARBusiness, Fiorina said the unified channel structure opens the door for HP and its partners to line up together and present a single face to the customer. "We will not be successful,and I'm not talking about surviving and making money; we all agree, we've been through that,unless our strategies and our partners' strategies are lined up," she said. "We have to think about ourselves as a single value chain, a single value to a customer. There's huge power in that, but it means that we've got to really address partners like this. That means that we have to have the conversations about where are we complementary. We have to have the conversations about where do both of us have costs that maybe one of us needs to get rid of."

In her keynote, Fiorina said $50 billion of the company's $73 billion in annual revenue for 2003 was generated and influenced by the channel. Although this number includes substantial retail-related contributions, it is more than 72 percent higher than the $29 billion that IBM says it generated in conjunction with partners last year, she said. Moreover, HP generated more revenue with partners last year than IBM, Sun Microsystems, EMC and Dell combined, Fiorina said.

Fiorina's channel march comes as HP, Palo Alto, Calif., faces fierce competition for the mind share of solution providers, particularly in the enterprise segment, where IBM claims it has recruited globally close to 400 formerly HP-exclusive partners in the past two years. It also comes with HP battling IBM's on-demand computing strategy with its own Adaptive Enterprise initiative. Fiorina, in fact, said the unified channel structure is critical to the success of Adaptive Enterprise, the mantra driving the feature set for all HP products going forward.Fiorina backed up her unity pledge with additional channel funding to finance attack programs against IBM and Sun. HP also launched a PartnerOne Unified Support Network that allows HP partners to either resell HP services or integrate them with their own services under the partner's own brand. Finally, HP's highly profitable printing and imaging group launched what it is calling its Rolling Thunder Output Strategy aimed at getting partners to act as consultants that can significantly reduce printing costs for clients.

HP's new IBM Attack program has pinpointed more than 3,000 older mainframes that could be replaced by HP server lines, including Superdome, said Jim Milton, managing director, Americas, and senior vice president of the Enterprise Systems Group. "We are going to go after IBM in the core pool of its profits," he said, noting that HP has already displaced 75 mainframes. HP's Sun program, referred to as Sun Eclipse II, meanwhile, has identified $147 million and 300 partners that could potentially be converted to the HP camp.

On the services front, HP's new Unified Support Network lets solution providers use HP call centers and related infrastructure in place of their own.

Ann Livermore, executive vice president of HP Services, who will lead the company's new Technology Solutions Group effective May 1, said the nature of the partnerships will range from the resale of HP services SKUs to becoming an authorized services management partner to evolving into an HP Services business solution partner. "The partner chooses the nature of that relationship," she said.

HP partners welcomed the strong channel message from Fiorina and HP's executive team, including Kevin Gilroy, newly named vice president and general manager of HP's new Solution Partners Organization for the Americas, effective May 1.Pete Busam, vice president and COO of Decisive Business Systems, a Pennsauken, N.J., HP partner that nearly doubled its HP business last year to $2 million, said he is more upbeat than he has ever been about his HP relationship. "It looks like behavior is changing and the channel has more opportunity, and probably where that is most evident is in services," he said. "HP can lead or the partner can lead. The key is they are engaging more directly with the channel, which means a bigger sale for them."

Some partners, however, are worried that the Fiorina channel march will not be embraced by the field. "When it gets down to the field, [the HP field-sales people] need to embrace the channel the way that Carly and Kevin [Gilroy] are articulating it," said Marlene Brill, president of Digitask, an HP enterprise solution provider in New York, whose HP business was down 50 percent last year. "I am challenging the HP management to make it work."

Rich Baldwin, president and CEO of Nth Generation Computing, a San Diego-based HP partner, said HP has several outstanding issues such as eHIP, its enhanced enterprise distribution program, but is moving to address them. When eHIP was launched Feb. 1, it took two weeks to get pricing for special orders from distributors. That time is now down to two days, he said. HP's goal is 24 hours, which is how long it took before eHIP was implemented, Baldwin noted. "That's funny, when Carly talks about simplifying business," he said.

However, HP is seeking to re-engage with the channel, Baldwin said. At the conference, HP handed him a list of 25 storage accounts it had worked with on a direct basis but now can't handle since cutting the number of storage specialists to four compared with 11 last year in the Western region.

It falls to Gilroy to translate Fiorina's unify and attack themes into action. As head of the Solution Partners Organization, Gilroy, who previously had responsibility for commercial channels, Americas, will report to Mike Larson, senior vice president and general manager of HP's Personal Systems Group, Americas, and Jim McDonnell, who was named to lead the channels push on a worldwide basis.Gilroy's short-term priorities include an overhaul of administrative operations supporting the channel, including a new PRM system to be introduced in the July/August time frame, and a task force charged with helping improve margins for both HP and its partners across hardware. He also plans to spend a lot of time with HP's enterprise partners for storage, Unix, Alpha and Itanium, among others. Actions Gilroy is considering include better sales alignment and vertical-market development activities.

"You can't just talk, you have to have action," Gilroy said. "You've got to get the pricing, you've got to get the intelligence, you've got to give them the guidance on what their standards are. You've got to give them access to high-level CIOs so they can map into that division's CIOs."

In closing her keynote, Fiorina said there are five reasons for partners to align themselves with HP: its scope and scale; its $4 billion annual investment in "focused innovation" in areas such as management, mobility and security; its ability to assemble compelling solutions and services offerings the channel can in turn sell to customers; its continued investment in programs, such as the $750 million it has dedicated to SMB initiatives; and its commitment to mutual profitability.

"I've never been more confident in the competitive position of this company," she said later in the CRN/VARBusiness interview. "Never."

CRAIG ZARLEY & JOSEPH F. KOVAR contributed to this story. 0