Alaa Alshimy, director, HP ESSN points to the right mix for the right channel strategy while discussing the possibility of introducing a cloud program for HP’s regional partners.
1. What are some of the key challenges that HP as a vendor faces when establishing a robust channel ecosystem?
One considerable challenge is associated with the number of players in the market. Apart from the 500 Preferred Partners, 20% of whom are Gold Partners, we have 900 proximity partners in the Middle East. Our strategy is to ensure that each of our partners secure the right percentage of the market share to justify their investments in training and certifications. Selecting too many partners, would mean dividing the overall market between all the players making the respective market share quite small, which may not make long term business sense for the partner.
Many partners with the required skills and technical competencies often don’t have the necessary experience or track record required to guarantee superior service delivery. These partners often adopt an aggressive pricing model eventually hindering the market for the more experienced players.
Some vendors make this situation even worse. With their flexible partner selection policies and low cost pricing to “buy” market share, these vendors offer compromise product quality and technical support. This practice often has a deterrent effect on the entire market. In some cases, this leads to the creation of a negative reputation and eventually leads to business closure. Too many immature partners is therefore a considerable challenge, in my opinion, in the long run the market will consolidate and not all players will survive, that is why we as vendors must be careful when selecting our partners.
There is another challenge, associated with the ‘lock down’ policies that many vendors adopt. These policies entail the vendors saying, “Listen, you only work with me and no one else.”
In my humble opinion, this policy goes against good business ethics or rules. Many partners are struggling to strike a balance, opening different companies under the parent to be able to work across multiple vendors, which isn’t wrong. Vendors must realise, that ultimately it is the customer who will decide what solution or system they want to work with based on benefits to the business such as TCO, availability of technical skills and support, etc.
Customers don’t want a locked in box anymore, they want an open solution that allows for interoperability and integration capabilities.
2. So what makes for an effective channel strategy?
The best channel strategy is one that drives a long term sustainable relationship based on the discovery and pursuit of equally lucrative opportunities for all parties involved. This is what we call a ‘win-win’ model, where we as vendors secure the ROI for our channel partners.
This is because we are familiar with the fact that our partners make significant investments to secure the training and certification requirements in order to engage customers and deliver superior service and therefore it is our responsibility to source the right market opportunities with a sustainable percentage of market share to be ensuring that there is a sustainable share of the market for each of our partners.
This also involves a situation where vendors develop the overall size or capacity of the market to ensure that each of the partner’s secures an appropriate profit and growth percentage.
3. How do you go about selecting and then categorising partners?
As mentioned earlier, we have a range of different partners, each selected on the basis of different criteria.
Preferred partners are those that are already in partnership with HP whereas Proximity partners are potential partners who don’t have direct relations or contractual relations with HP.
Considering the current size of the market we then go about selecting our partners very carefully. Partners are selected based on the health of their financial statements, credibility and ability to meet a set minimum number of sales and technical requirements.
Preferred Partners are then categorised on the basis of specialisation, depending on the area of the partner’s choice of operations. For instance, if a partner chooses to acquire storage specialisation, the partner organisation needs to secure a set number of associated certifications. In return for every specialisation earned, a partner is eligible for a said incremental amount of money over and above the partner commission or margin for every sale. This is what we call ‘pay for results’.
Partners without specialisation don’t enjoy any monetary benefits other than the regular commission or partner margin but can leverage HP support on various levels from technical training and certification to spare parts and delivery.
We have a higher level of requirements for the CI or converged infrastructure specialisation, where in a partner needs to meet minimum number of requirements across each specialisations in order to deliver HP’s CI portfolio. At a worldwide level HP also offers cloud specialisation.
We are also consciously investing in what we call the ‘global accounts’, increasing the overall share of the market open to HP product portfolios. We engage these accounts to go through the partners and distributors, growing the share for each one of the members involved.
4. Tell us a little bit about the Rising Star Programme that you have recently launched?
The programme is associated with selecting the top performing candidates from all of our Proximity Partners based on the sales-out reports, the partner’s market references, credibility and financial stability.
These 200 top performing Proximity Partners have been invited today to familiarise them with HP’s future strategy and the Rising Star Programme that is focused on how they can become Preferred Partners, a previously complex process that could take up to three months.
With this initiative, we are working towards simplifying the process for our most promising partners bringing the lead time down to two weeks. Partners registered with the Rising Star Programme will also earn incremental dollars above regular commissions or margins for every sale made.
The programme is our way of motivating our top performers and proving to them that we appreciate their efforts for successful operations.
5. Do you think the channel in the region is ready for cloud?
Although a few players in the region look cloud ready in terms of their financial and strategic infrastructure, none of these players are taking conscious steps towards implementing the cloud.
The only partner, who talked to me about becoming a cloud provider, was based in Egypt and is exploring the opportunity to be a public or hybrid cloud provider.
While many customers are already implementing the private cloud, I don’t think any player in the current channel community is ready to become a cloud provider- public or private. However, I am optimistic that this will happen in time.
6. Why do you think this is so?
In the past, we have had a number of bubbles and busts in this industry. Therefore, it is only natural that a number of players in the market, both customers and partners look at the cloud as just another passing fad and are apprehensive of investing in the same.
Another reason is that security is a major question associated with cloud provision. When am in a public cloud and I have all my apps, data, etc. hosted with someone else outside the country, the most important thing for me is how secure this cloud environment is? Another major concern with the cloud is associated with availability and reliability. If I’m a hospital or a bank i cannot any downtime what happens when the cloud SPs service is disrupted? What will the financial impact of such a situation on my business be?
The fact is that the cloud is a reality and it is the logical irrevocable way forward. This is nothing but resistance to change, it is already happening in the west and as with other technology, the Middle East will follow suit.
7. What is HP’s cloud strategy for the Middle East channel?
We have a cloud program for partners at a worldwide level; however I have made a conscious decision not to introduce this in the Middle East level yet. This is because I don’t think the market here is ready yet and I don’t see a need to invest in the same until there is a ready market for the technology to prove advantageous for us as a vendor and our many partners in the region.
I am also exploring the opportunity to develop a joint or hybrid cloud with a number of key players in the region; I am unfortunately not permitted to disclose the entity’s name. This is not one of our partners, but one of our customers who we think could potentially partner with us to develop the joint public or hybrid cloud.
We are open to the idea and will be happy to introduce our cloud program once the right infrastructure and market readiness is available in the region.