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HP has redefined the rules of partner engagement to quench the growing dissatisfaction among partners over the issue of direct selling. While the policy looks great on paper, will the ground execution match up?
By Dhaval Valia
HP India’s new partner engagement policy comes at a critical juncture when several of the company’s long-standing partners have been raising serious doubts about its commitment to the channel. In the past year there has been growing discontent among the HP partner community over the vendor’s alleged direct selling tactics and lack of transparency in its named account policy.
Says Sameer Mathur, head, solutions partner organization, HP India, “The new policy has been in the making for almost a year. We have factored in all the inconsistencies reported in our partner engagement program by our partners. The policy is aimed at eliminating any confusion or doubt within our internal teams and partners about what business will happen directly and what indirectly.”
At the heart of the new program is the revamping of HP’s named accounts policy which delineates ownership of customer relationships. Named accounts are essentially customers that HP engages with but not necessarily sells directly to. These are customers who the company believes are investing substantially in IT. All the three business units of HP have their set of named accounts. For instance, PSG has 2,000 named accounts, IPG has over 800, and TSG has a little over 300.
HP categorizes named accounts into three subsets. The first is HP Direct, where HP deals directly with the customer. This list constitutes very large Indian enterprises and large global customers. The second set of named accounts comprises HP-led but partner-managed accounts, which means that the billing is done directly by HP but its partners manage customers by providing solutions and services. They also get ORC on the bill of material even though it’s billed directly by HP. This set mostly includes dollar-billing accounts. The third type is partner-led and partner-managed, and means customers who are managed totally by partners. Beyond these named accounts, all customers are exclusively for channels to manage.
Reasons for channel dissatisfaction
The partners’ main complaint has been the lack of transparency and consistency in implementing the named account policies which is creating serious conflict between them and the HP Direct team.
“There has been complete lack of consistency in implementing the named account practice. In many instances over the past year, the HP Direct sales team has trespassed into accounts which are partner-led and HP has no business dealing with them directly. In our case, we lost a large deal to the HP Direct sales team despite doing all the pre-sales work. Why? Because the account manager overnight included the customer in the HP Direct list,” complains Vasant Vartak, the CEO of Kalyx Infotech, an exclusive HP partner.
Agrees Ajay Sawant, the CEO of Mumbai-based Orient Information Technologies, which lost two multi-crore deals after HP decided to sell directly to the client at the last moment. “We did all the ground-work to develop the lead and laid the foundation for signing the deal. For the final meeting we took an HP manager along to get a quick closure. Four days later we were informed by HP that the customer wanted to buy direct. Later, we were told by HP managers that it was at the customer’s insistence that they were compelled to sell directly,” says Sawant.
Delhi-based Targus Technologies, a key HP partner, has had a similar experience. “HP directly sold to Bharti Telecom which has been our oldest customer in spite of knowing that we had also pitched for the account. We had invested significant resources over many years to develop and retain a client like Bharti. The excuse given by HP was that it was Bharti which insisted on buying directly,” says Raunaq Singh, director of Targus.
“There have been a few inconsistencies in managing named accounts by our internal organization,” concedes Mathur. “There was lack of transparency in the way certain accounts were transferred. These inconsistencies led to a false perception that we are selling more directly to customers. But 70 percent of our IPG and PSG sales are billed through distributors. And of the 30 percent that is directly billed by HP, nearly 80 percent of the volumes are sold to customers that are HP-led but partner managed. Effectively, in 90 percent of our business there is partner play. I agree that due to lack of transparency and consistency in managing partner expectations such false perceptions are created even though they are far from reality.”
With the new policy, HP is claiming that it would be rationalizing the existing named account policy. “Under the new rules, all named accounts will be clearly categorized as per the classification given above. Once the account is mapped by category, it will have a lock-in for six months. This means that HP will not change the status of the account for at least six months,” affirms Mathur.
Also, the decision relating to the change of status of an account will be taken at the highest level and not by channel or account managers. Only the business unit heads will have the power to alter the categorization of any account. The company will also be transparent in communicating why a certain account needs to be reclassified, and partners will be taken into confidence.
Wait and watch
Understandably, the new policy has been received with a certain degree of caution by partners. “It looks great on paper. Let’s see how it’s executed. The decision to lock-in an account for six months seems logical. Also, the fact that the senior-most manager will be responsible for making decisions on named accounts sounds good—but practising it will be difficult considering the large list of named accounts,” says Orient’s Sawant.
Vartak agrees, “The top management has always been pro-channel. It’s the field staff who have been erratic and inconsistent. HP, like other companies, faces huge attrition problems, and so every six months the channel and customer account manager changes. The new chaps have no idea of ground realities and don’t value partnerships. The gap between policy and execution is huge, so I will reserve my judgment till I see positive changes on the ground.”
Another partner, who asked not to be named, sees the new policy more as a tactical move rather than one having any strategic and long-term commitment. “The new engagement policy has come about because HP has burnt its hands selling direct to customers and has accumulated huge account receivables. It could be as much as $100 million. That’s a substantial figure, and I believe that’s the reason why it’s renewing its support to channels,” he says.
Mathur is unfazed by such skepticism. “Our new rules of engagement apply to our internal organization as much as they do to our partners. The new policy will require changes in internal processes. We have effected a change in the way qualitative and quantitative goals are set for our managers to ensure that their goals are not in conflict with our channel commitment,” he states. |