HP Australia has doubled the resources it dedicates to creating and supporting packaged IT services to be sold through its dealer channel.
HP Services employs about 3000 staff in Australia, mostly to directly fulfil service contracts it holds with large named accounts. But the vendor also employs a team, dubbed Service Channel Partner Management (SCPM), charged with scanning the array of offerings HP Services provides and packaging these services as a line item that can be sold on a commission basis by HP’s channel partners.
The SCPM team has doubled in the last twelve months, to the point where more than 20 per cent of the revenue earned from new deals by HP Services is now sold via HP’s channel.
Most of the services SCPM packages for HP’s channel partners are natural extensions on generic HP products and are sold under the “Care Pack” brand.
Such services include warranty support, education services, software support or help desk.
Any authorised HP partner can sell these volume services, earning commissions of around 10-15 per cent.
A select group of HP dealers (around 60) are “authorised service providers” – and are able to both sell and fulfil warranty repairs packages on behalf of the vendor. These partners must meet stringent criteria – it is required that they provide such value-adds as helpdesk facilities, certified engineers and a commitment to selling HP product.
Another very select group of HP resellers (currently around 10) are authorised to sell high-value services alongside the HP Services. These services, such as business continuance, complex storage implementations, enterprise back-up services or mission-critical server implementations, can earn resellers margins of 15-20 per cent.
Manager of HP’s SCPM team for the South Pacific region, Mike Bazely, said he was keen to keep this list of partners as small as possible to maintain high margins.
“Most resellers have developed services skills in order to cope with decreasing margins on product,” Bazely said. “But the costs involved with providing a full range of services is exhaustive. Building a services company with a breadth of expertise is hard enough - keeping them well-utilised is another.”
Bazely estimated that services companies needed staff utilisation rates of at least 65 per cent in order to survive.
It is this challenge that led HP to consider using its channel partners to leverage the surplus of skilled engineers employed by HP’s direct services team.
“We also recognise that 80 per cent of IT services are sold at the same time that the product is sold,” he said. “Our message to resellers is - services are profitable and can be sold with a small amount of additional effort.”
Large resellers, even those with services competencies, were able to slot in HP Services in whatever area they felt they lacked skills or wished to mitigate risks, Bazely said.
The reseller could itemise a service on their bill to the customer as though it was a product.
The provision of that service became a variable rather than a fixed cost, reducing cash-flow issues, he said.
The provision of services has traditionally been acknowledged as an area of potential channel conflict. But Bazely is supremely confident that
HP has created a model that reduces the potential for such conflict. The SCPM team recently developed “principles of engagement” in order to form clearer boundaries between HP Services and channel partners.
The next 12 months should see SCPM offer several new opportunities for resellers, Bazely said.
On the volume side, HP’s SCPM team will launch the first of its non-warranty services that can be delivered by both HP Services and its channel partners. This will allow resellers to not only sell simple installation and implementation services on behalf of HP, but also earn revenue from fulfilling the contract.
On the Value side, the SCPM team is assessing a new range of services to be sold into the small and medium business market. These services will focus on technology hot-spots such as security, wireless and back-up, Bazely said.