Hewlett-Packard is putting its money where its mouth is as it moves to battle rivals with a new four-tier PartnerOne channel program, which is based on both revenue and certifications and packed with significant new financial incentives for partners selling the full HP product portfolio.
The new PartnerOne global channel program, which goes into effect Nov. 1, encompasses HP's enterprise products, software, and printing and personal system portfolios and provides dramatic increases in profitability as partners move up the stack from business partner to Silver specialist to Gold specialist and finally the highest Platinum level.
Partners said the new PartnerOne marks the first time ever the $120 billion IT product and services giant has brought together all its might and muscle into a unified partner program with robust rewards for partners selling a full end-to-end HP solutions portfolio.
The increased margin at the Platinum tier is sure to put intense pressure on partners taking the "path of least resistance" selling competitive offerings like Cisco networking or EMC storage rather than a single converged HP solution, said Fred Traversi, the president of AdvizeX Technologies LLC, one of HP's top 10 enterprise partners and a unit within services giant Rolta, a $500 million IT services powerhouse.
"HP has just upped the ante," said Traversi. "Partners selling a smorgasbord of OEM offerings are going to have to make a decision. If you sell an integrated HP solution, you are going to make more money than you would selling those easier-to-sell standalone solutions."
Traversi expects product margins at the top-tier Platinum level to rise as much as 20 percent compared with the Gold level. "It's going to be hard for a partner to walk away from selling an HP Converged Infrastructure solution at the Platinum level with gross margins north of 20 points," he said. "It's a compelling proposition."
One sign of the power of the new HP PartnerOne incentives: AdvizeX is doubling down on HP's networking and big data software product offerings combined with HP converged infrastructure. Traversi calls his company's HP networking investment the largest bet he has placed in his 12 years at the company. "They are very big investments, but with the potential and probability of very large returns, he said.
Traversi, who has been working in the industry with HP channel programs for 34 years, said there never has been as much money put on the table for partners selling an end-to-end HP solution. "HP has always had an effective partner program, but this is the first time they have brought the power of total HP to partners," he said . "This will be the first time AdvizeX is rewarded for loyalty to HP. The bigger you are as a partner, the more valuable it becomes."
Partners Go All In With HP PartnerOne
AdvizeX isn't the only partner making significant new investments in staff and resources to sell and service HP's end-to-end portfolio. Enterprise partners like Westminster, Calif.-based CB Technologies, Sunnyvale, Calif.-based Bedrock Technology Partners, and Irvine, Calif.-based Nth Generation Computing Inc. are all doubling down on HP, investing more in HP's end-to-end portfolio. They said they see a marked step up in HP's commitment to drive channel sales growth under HP CEO Meg Whitman. They said the PartnerOne changes set for 2014 will drive big profits for partners committing lock, stock and barrel to HP.
"If HP works with a partner that is all HP, they know we are in there fighting for HP storage and HP networking," said Scott Douglas, senior vice president of sales for CB Technologies. "Most other resellers will take the easy way out and go with what is probably already in there, which is not HP. They are likely going to bring in the competition. You need a partner that is going to live and die with you, and that is what CB Tech is for HP."
HP, for its part said the new "customer-facing" PartnerOne membership tiers will open the door for HP to actively promote top-tier HP partners in HP marketing campaigns and make it easier for partners to differentiate themselves in the market.
The financial benefits will be significant for a partners selling end-to-end HP solutions at the Platinum level, which requires HP enterprise-software certifications and a significant commitment to a pan-HP solutions portfolio, said Doug Oathout, HP's vice president global marketing, channel partner alliances and OEM, enterprise marketing. He said Platinum Specialist profitability will jump 20 percent with the average deal size in the U.S. expected to double to $300,000 compared with Gold Specialist partners.
Under the new PartnerOne program, partner compensation will consist of three elements: core compensation with an accelerator for hitting sales growth targets; new business opportunity rewards; and strategic product bonuses aimed at rewarding partners for selling next-generation products like Moonshot, 3Par and HP networking. That strategic bonus for the first time will be built directly into PartnerOne for minimum six-month intervals rather than as individual product promotions, which required significant paperwork and approval gates. "Now partners don't have to claim them," said Oathout. "They will automatically get it. The key for us is selling solutions and accelerating the adoption of key products. Partners will know ahead of time ... what the strategic products are, what the bonuses are, and it will be built into the price of the products."
HP plans to announce final revenue "thresholds and benefit rates" for the new PartnerOne tiers in October, said Oathout. What's more, the company plans to make additional PartnerOne enhancements aimed at driving partner sales growth for 2014.
Oathout anticipates the net impact of the PartnerOne changes will be to drive a new class of large franchise HP partners selling end-to-end integrated HP solutions. "Today some of our largest partners keep us at arm's length because they don't want so much revenue going to HP because they want to keep a balanced portfolio between us and competitors," Oathout said. "This is the time to change the game and have partners become more strategic for us. Instead of being the arms supplier or arms dealer, we are going to become a partner delivering solutions versus piece parts."
The Platinum specialist benefits include strategic initiatives bonuses, enhanced rebates and HP executive sponsor participation in driving sales growth. HP expects over the next two years to drive about 300 partners in the U.S., the top 10 percent of the company's partner base, to the Platinum Specialist certification.
Page Murray, vice president of worldwide channel marketing for HP, said he expects the increased benefits from PartnerOne to drive more partners selling competitive offerings into the HP fold. "Nobody knows how to make money faster than a channel partner," he said. "As soon as they get the formula and realize they'll make more money selling HP, they're going to start to cannibalize the other [vendor-oriented sales] teams to fund the one group that is making money."
A Single Globally Consistent PartnerOne
Partners said just as important as the more predictable revenue and competency-driven medallion program is the simplicity being driven by HP in the new PartnerOne program with fewer certification requirements and a single worldwide global program. In fact, they said the fewer certifications and reduced paperwork requirements that come with PartnerOne will significantly lower vendor management costs associated with HP.
"I have been watching HP's channel partner program for 20 years, and historically the issue hasn't been not putting enough money on the table; it's that they have made the money too hard to find and collect by virtue of administrative burdens of the program," said Cyndi Privett, a principal for Viewpoint Research, a Scotts Valley, Calif., channel program research company. "The most impactful and important changes of the program are almost less about the actual incremental dollars but more about making it simpler and easier for partners. They have made PartnerOne much more transparent. You no longer have to have an MBA in PartnerOne to leverage the program. There is a real opportunity here to drive sales behavior with the partner dollars they are putting on the table."
In the enterprise group alone, HP's certifications will be reduced from 42 to 22. In HP's server line alone, certification will be reduced from 10 to three.
The single, unified global program, meanwhile, will also make it significantly easier for larger HP partners selling around the world. Between the enterprise group and printing and personal systems, HP had 18 different partner programs in different countries. That means partners selling cross-border for the first time will be able to benefit from a single PartnerOne compensation model.
Brandon Harris, vice president of HP solutions for Logicalis, a $1.4 billion IT services giant ranked No. 29 on the SP500, said HP's drive to simplify and streamline PartnerOne will make it easier to do business with the computer giant. He said HP under Whitman's leadership is "making all the right changes" to drive sales growth in 2014.
"I think they are going to make significant progress going into next year," he said. "From a partner perspective, Meg [Whitman] is sending all the right messages, and it is trickling down into the organization. The whole attitude and behavior in the field is dramatically different. Meg has made it clear HP needs to engage and invest in the channel, and she is holding people accountable to how HP is interacting with channel partners."
As HP implements sweeping new PartnerOne changes set for Nov. 1, the company holds a significant profitability advantage over competitors, said Harris. "HP has the upper hand," he said. "There are some radical differences between PartnerOne and the other vendor programs. PartnerOne is the most lucrative program in the industry. If you look at the pure profitability of the relationship, you have to give HP credit for being at the top of the rung where partners make money."
PUBLISHED JUNE 26, 2013