HP ROUND TABLE The new look HP

HP ROUND TABLE The new look HP

ARN's Cameron Tomes and Paul Zucker recently held a round-table with Hewlett-Packard management, a high-end HP reseller and a corporate HP user. We had wide-ranging conversations about the way HP is reorganising internally, how it perceives the channel and how the channel perceives it. In this week's report from the round table we concentrate on what HP says about itself. In our second instalment, we'll look at how HP is perceived by its resellers and users. HPers present included John Bieske, general manager, computer channels organisation; Norry McAllister, general manager, enterprise accounts organisation; Chris Greig, sales and marketing manager, computer channels organisation; and Rebekah O'Flaherty, marketing manager, computer channels organisationARN: How has HP changed recently?

Bieske: Officially the transformation started on November 1 last year when we consolidated our computer operations into one unit, the Computer Organisation. This unit has various elements to it, a key part of which is that we want to drive the business from a customer's perspective, not from our own perspective, like we've done in the past.

We are trying very hard to present a unified face to our customers. A complaint we have had in the past is that accounts have had several people working on them. Customers, however, just wanted to talk to Hewlett-Packard alone - not to four or five individuals representing us.

The new concept is a single face that represents Hewlett-Packard, with a number of specialists and resources that we will pull in to best meet the needs of that business.

Our enterprise accounts organisation, corporate resellers, wholesale distributors, solutions resellers, will all be bundled under the computer organisation.

Additionally we have the support organisation, the software and services group, and our professional services organisation.

Each one of these groups is represented by four people, headed by Bruce Thompson, our managing director. The group meets every couple of weeks.

We are going through some teething problems as the organisation settles down. Our computer sales and distribution vice president, Dick Watts, sent out a survey just after Christmas. The results of that were that we are making some headway, but we still have some things to put in place. I think it is evolutionary rather than revolutionary, it has brought the team together but it is not the end yet. I think it is just the start of how we will organise for the future.

McAllister: In terms of focusing on the clients, what we've done is formed the enterprise accounts organisation to focus on a smaller number of clients in the organisation. The idea is to bring Hewlett-Packard as an organisation to those clients on the basis that Hewlett-Packard is a very broad church with lots of offerings.

We want to leverage those offerings on to the clients and - like everybody else - we'll do a lot of business. So we'll do most of our business on a smaller number of clients.

Before, we were reactive and waited for things to pop up. We were opportunistic.

There is one thing you can be sure of if you do that - you do not provide the customer service that you want to give to your customers. If you want to play particularly in the big league, with the big customers, you cannot afford to be doing that.

Unfortunately sales people tend to like doing that, so what we're going to do is take away their choice by giving them more focus, work on a much smaller number of accounts and they'll have nowhere else to go. Give them a tight focus of what it is they are supposed to achieve in terms of the customer satisfaction and customer service level.

So that really is taking away that go anywhere, do anything kind of approach. That is purely to increase the customer service and again that is not so we can be nice. It's purely mercenary. We know that if we provide that customer service we know how much more successful the business will be.

Do you differentiate between customers that you will deal with directly and other customers that you prefer to go through the channel?

McAllister: No. Our preferred route for most of our business is to work with a partner. So there is no cut-off. There is no "well you're big and chunky so we'll deal with you direct and you are small and significant so we'll only deal with you through the channel". That would cut people into first and second class citizens and that is not what it is about.

The idea is that we work with the channel, particularly regarding large high-value systems with lots of added value. In this situation you need a partner who is helping you make a more complete solution - not somebody who just fulfils the order.

To be honest, you don't need somebody to just fulfil the order at a very high-value, low-volume stage - what you need is an added-value partner.

But you need all those from the smallest to the largest customers. So there aren't any customers really, who have any particular reason to be dealing with Hewlett-Packard directly. There will always be end-user sales people involved in the sale.

Dealing directly doesn't mean supplying directly.

Is there ever a problem caused by multiple layers in a client organisation dealing with multiple sources? By this we mean some people going direct, some through the value-added channel and yet others going to OfficeWorks to buy their consumables. Does that cause a problem or is that relationship part of your new philosophy?

Greig: That is all part of the relationship - building up the client relationship. What does the client want? What does the client need? Different things will happen different ways. For a lot of the consumable and higher-volume, high-value product, they will have a local supplier. But when they are working with the very high value-added they will want to work with a partner that they work with all the time.

This is what Mike (Mike Shove, general manager, alliances, marketing and operations, GE Capital Information Technology Solutions) works on.

Is there an accreditation process for different levels of selling?

Greig: With consumers and mass merchants - the Harvey Normans, the OfficeWorks - we only work with five top resellers as mass merchants.

We've got another 15 that sell our products, but not the full range. All of those go through an accreditation process. And we provide some added value.

Certainly, the top five get local account management, the next 15 will get some added value that the greater market out there in consumer and retail land doesn't necessarily get by just buying through their wholesaler.

Those 15 will buy through their wholesaler but will get special attention from Hewlett-Packard. And then we have our commercial channels.

We have around 12 direct partners supplying our Intel NT boxes. We've got another 45 that buy through our wholesalers - but again, they are accredited and so receive special attention from Hewlett-Packard.

Now many of those are players that are focused on a specific market, like education, finance and some of those companies are growing up to be quite important outsourcing SI partners of ours, but they are buying through wholesalers.

So they are all accredited. They do have targets that we strive for them to meet, by working with them, usually by the telephone but they won't have direct representation by an account manager calling upon them. We will get involved in a pre-sale situation with them through our corporate account team into those deals that require that sort of representation. So yes, they are accredited within that scheme but there are, however, many thousand out there who buy our products.

What do you do with the rest of the reseller community?

Greig: We rely very much on our channels of distribution and wholesalers to provide the support and infrastructure for that to happen. However, many of them are very small companies - "one-man bands" - that we can't have contact with on a day-to-day basis, other than providing some support services.

Do you mind which reseller sells what? For instance, if I wanted to buy a cartridge for my HP printer I could probably choose a dozen places within two blocks of here.

Greig: Our goal is that we want you to buy it where it best suits you. We don't care where it is or who it is from.

Is it a bother to you that the price of consumables changes dramatically from place to place?

Greig: I don't think it annoys us, as long as the customer can buy it. If you want to buy it out of hours you will probably pay more.

If you want to buy the cheapest, you buy from the normal trading outlets. In the US we've tried some vending machines for some of our suppliers, and the goal with those is that as you leave a Coles supermarket or Shell service station, you put your credit card in and you take away a toner cartridge, or an inkjet toner cartridge. So it is about the ease of buying.

I think there is a whole exercise going on right now for branding that category of products. You'll see the Kodak gold, you'll see the HP blue. That's the type of product it is.

How far up the product chain can you take that?

Greig: You'll see there is a complete branding of HP's consumer line that is taking place right now across multiple products.

We're going to give them all the same look and feel, and I believe it's being launched as we speak.

It is nice for the reseller that there is very little that you sell that you can download off the Internet.

Greig: Yes. We haven't been able to do that yet - the pipes are a little small.

What sort of online ordering of HP product do you think we will be seeing? And who will fulfil the order?

O'Flaherty: I guess it is clearly something that is facing the whole industry and it is something that, particularly in the last quarter, we have been discussing very seriously with our channel partners.

It is critical that our channel partners partner with us in this new medium.

Do you see the day coming soon when large users will have automatic ordering systems - so they have an internal system that tells them how many cartridges they need?

O'Flaherty: We do it today with some large accounts. We have something called Customer Connect where we have agreed pre-configured systems. We sit down with the customer and create an Internet site with them. The customer can go in and pick the price, pick the product and send us an order electronically.

Is this like a global account?

O'Flaherty: No, it doesn't have to be at all. We are doing it with small customers as well as larger customers. We take their order and feed that electronically to HP. What we are really trying to do is cut some of the costs from our perspective.

So how does HP manage a situation where there are two resellers on a large account, supplying the same sort of products to that customer? How does HP prevent both resellers from becoming disgruntled and feeling they might be disadvantaged by the other one, or that the other one is getting a better deal?

Greig: These scenarios happen. At the end of the day what carries through is the amount of integrity, openness and communication you have. It is when the communication breaks down that people make assumptions on what has happened. There is no doubt we will partner with resellers, be they directly or indirectly contracted, who want to work with us on specific accounts and drive the HP brand.

We may partner with them to the exclusion of other people to get the HP solution across - I think we have to do that. We have to stand by them, not just stand behind them.

Is it possible that one of the local distributors, such as Tech Pacific, will be assembling for you? Or will a US distributor assemble the machines in the US?

Bieske: We've got open minds as to how we're going to do it. The most efficient way to get the product to the market, to the end user, is what we've got to focus on, as well as cost. That's what it's all about. I think our facility is going to manufacture our Intel-based PCs. We're looking at expanding it into other lines and other products over the next year so that we provide more reliable delivery, and in the process, cut some of the costs there in terms of supply.

There's a big push around the world for built to order. Is that important to HP?

Bieske: Yes. HP has a very robust program for channel assembly in the US, but the economics of the United States is very different from that of Australia. I know people who have found that out the hard way. At this point, we've chosen to say that we think the model we have - where we have our own assembly capability - is just as efficient, just as nimble and more attuned to Australian requirements.

In a year's time we'll be looking very closely at the US to see what their model is doing, and if there are some things we can bring across to help make the channel assembly a reality in this country.

Is it conceivable that one of your US channel assemblers would set up here and offer HP products sourced from the US?

Bieske: We have six distributors trialling that in the US, and it's successful, as far as we can tell. I think that's a very focused program for the US. It doesn't fit the model here because we haven't got the levels of business, and it won't support it for a long time.

Bieske (on HP and the press):

We are planning to deal in a much more focused way with the press. We have got teams of PR people across our company. We are bringing them together in one group to look at six main areas of how we are going to deal with the press.

We are going to have an ongoing training program where we will engage a company that has got the expertise to teach us how to deal with the press better and more effectively.

How we deal with the media is going to be very important to us in the future, in order to get this mystery - that some of you think we have within HP - out in the open.

I think we haven't been telling you the whole story about HP business. It's a great story in the big picture.

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