On the Mark

CMP channel industry editor Craig Zarley sat down with Hewlett-Packard Co. chairman and CEO Mark Hurd at HP’s California headquarters to discuss Hurd’s view of the channel and how solution providers fit into the vendor’s plan to grab a bigger slice of the global IT market. Excerpts follow.

CRN: Now that you are the industry leader in terms of revenue, is your goal to be merely competitive with other vendors in terms of profitability or do you intend to lead the industry?

Hurd: We are in different segments than other IT companies. It would be improper for us to say we are going to be the industry leader in profitability. That’s not our objective. If you want to be the leader, there are lots of definitions to leadership. It isn’t just financial benefits. We want to be the best partner; we want to be the best from what we call a total customer experience and partner experience perspective. The only way on a sustained basis that we will lead, especially from a channel perspective, is if our partners are happy. Happy doesn’t mean that I just give you lots of money for not doing a lot of work. There has to be a balance. There are two arguments here. I want to do the things I’ve always done, I just want to make more money doing it. That’s one discussion. We’re all under economic pressures here. Nobody calls me up and says, ‘Here’s an extra bag of money for doing the same thing you’ve always done.’ What we’re looking for are partners that want to come up with new, innovative, exciting things to go do – investments where we take some risks together. We’re anxious to help get partners more profitable when there are some exciting opportunities for us to go pursue together.

CRN: But are there any specific benefits HP-exclusive partners receive from HP that help them be more profitable?

Hurd: If you take a unit and strip it, our gross margins are down here. [Hurd points to a chart he’s drawn showing how profitability increases as the complexity of the HP solution increases.] As you go up in attach and portfolio, our gross profit goes up. Partner profitability has to mirror ours. The arguments I get into are, ‘Hey listen, I moved a bunch of shelved PCs last month.’ If you took memory out and didn’t sell CarePaqs, I have no money to give you. You can ask me for more money, but I don’t have the money.

CRN: What’s HP’s strategy to jump-start storage in 2008?

Hurd: We’re going at it hard from a product perspective. We are going at it hard from a distribution perspective. We have put channel programs in place and we have channel partners with more investments on the line to get more aggressive in HP storage this year. We’re working hard on product rollouts. This is an area that is very important and strategic to us and we’re on it. This is a big deal to us.

CRN: Dell made a recent storage acquisition with EqualLogic. Could we see HP make a storage acquisition in 2008?

Hurd: You could see us do some more. I’m not trying to make any predictions. But HP’s bought about 24 companies in the last three years, and we’ll continue to look at things that make sense. Storage is one of those areas. When you look at digital content, it all has to be processed, stored, visualised and printed. There will be more things stored in the next five years than in the history of the planet.

CRN: An important aspect of a successful channel strategy is getting your message out to partners, but the tougher part is getting that message down internally through HP. What message do you give HP people regarding the channel’s role and how HP should work with solution providers?

Hurd: SPO and Adrian Jones [vice president and general manager, Americas Solution Partners Organisation] has to make sure we are lined up with our channel partners and the role we want them to play. Second, the HP sales organisation has to understand those roles and execute on them. We’re partner-friendly at every turn. There’s no economic advantage or difference to us. And in my view, this is channel-favourable. Any time you say to the sales force you can partner or go direct, they always want to partner because it’s easier. They get more help. We are very much of that mode. Our channel business is growing at least as fast, if not faster, than the company is growing. We don’t have a super-secret strategy to move everything direct. There is no super-secret compensation scheme. There is no behind-the-walls meeting where we say, ‘Hey, we said this publicly but internally let’s go do it this way.’ We have one story. The reason we have one story is so that we can all remember it. We’re too big to have three stories or four stories or five stories.

CRN: How did you come to the conclusion that channel partners are vital to HP and how do you motivate them?

Hurd: I have to think of the partners no differently than [an HP-badged person]. That’s what I keep saying to partners; you’re me and I’m you. It’s got to be one integrated relationship. It can’t be confrontational. It’s nothing more than a decision of where I’m going to put my resources. If I’m going to put it with you, you’d better darn well be as good as me or I’m not going to win. So when I show up with partners, I want consistency, predictability and simplicity. That’s the same thing our employees want. I’m coming to you channel partners saying, ‘I want you to be as loyal to me as I am to you. I want to have that relationship where I can bank on you, and the more you do with me, the more I can bank on you.’ I want partner loyalty. This is all one ecosystem – to get the right people in front of the right buyers at the right time and with the right capabilities.

CRN: What are some specific channel accomplishments during your tenure that have benefited HP and partners?

Hurd: We’ve more [salespeople] out there. For our loyal partners, we want to create demand. Our people are creating demand for HP products; they are not out there trying to determine channel preference. We tell our partners all the time, if you can close that business and get it done right, we’d rather have you have the business than we have the business. Here’s the economic problem: I’ve got to get that number [HP’s share of the 2009 US$1.2 trillion global IT market] as high as I possibly can get it and we can’t do it alone. I can’t hire enough humans. The only way I can get there is that I have to have friends. What I’m looking for is to have the best friends I can get. Casual acquaintances don’t help me near as well as friends.

CRN: You have this ideal vision of a loyal HP partner. Do you have more or fewer of those partners than a year ago?

Hurd: I think we have more this year than last. This is not a thing where we get more logos. We need quality partners. Sometimes getting one, two, three, four or five is not a worse thing than getting 10 or 15. There are a lot of quality partners that could do more with HP.