HP Channels Partners for SMBs

HP is fortifying its $750 million Smart Office promise with the introduction of a host of hardware and services this week.

The Palo Alto, Calif.-based computer and printer maker Monday is
scheduled to highlight the initiative aimed at the more than 22.9 million small to medium-sized businesses (SMB) in the United States.

The program is one way HP is hoping to differentiate itself from low-price rival Dell and sales champ IBM . HP’s pitch is to offer a bevy of Intel-based laptops, microtowers, workstations and printers to entice new customers.

Then it keeps the momentum going by dovetailing the hardware sale with its Smart Solutions
platform. The program includes its Smart Infrastructure Solutions and its
Smart Business Application Solutions.

HP said it has five new services designed from the bottom up a result of
conversations with its SMB partners including an IT professional help desk
that offers level 2 and level 3 help desk support. The company is also
offering two separate financing options. The program focuses on mobility and
wireless, imaging and printing, servers and storage as well as Web
development and even online training courses.

So much of the IT industry seems to be riding on sub-1,000 employee SMBs
these days. A new study from Yankee Group research indicates that U.S. SMBs
spend about half of their annual IT budgets on new computers. According to
the U.S. Small Business Administration, home-based businesses account for as
much as 53 percent of all U.S. small businesses. HP said a third of its
Services Division budget is spent on SMBs.

But HP said its Smart Office initiative would amount to just a computer
and printer sale were it not for the help of its partners.

“This is a channel-centric plan,” HP vice president and general manager
of customer support business ML Krakauer told internetnews.com. “In
many cases we are delivering this with our partners in our network.
Customers value the local relationships with our partners.”

Much of the support comes in the form of HP’s PartnerONE Unified Support
Network. The idea is to give customers access to local experts. The company
said the program is focused primarily on the finance, legal, health care,
and real estate sectors although HP said it would never turn up a chance to
steal away business from the competition. While the initiative is North
American-centric, HP has similar support infrastructures in its European,
Middle Eastern and African channels. Currently, HP Director of Sales and
Development for SMBs Chris Ogburn told internetnews.com the 24/7
support is being run in-house at HP but that is expected to grow as the
Smart Office initiative takes off.

“Part of the value proposition is the idea of a one-stop shop and there
are services that we offer that support that approach,” Ogburn said. “We’re
not trying to force an overweight solution into a business, say like our
competition might.”

HP said it has been spending a fair amount of time with its channel
partners in preparation for the Smart Office launch.

“We believe a big differentiator for us is that our customer’s preference
over time is to partner with local companies that they trust; they know each
other through the community,” HP vice president of SMB Enterprise Systems
Group Nigel Ball. “For us a big part of that is the existence of our channel
partners who provide our services and recognize the importance of the
technology.”

While HP is taking a more focused approach to the problem, the idea of
using channel partners is not unique.

“While a service led play may seem logical in that context, the fact is
that the need for services is highly differentiated within SMBs as is the
need for software,” RedMonk senior analyst Stephen O’Grady told
internetnews.com. “This is why other vendors have chosen to go to
market with specialist, often locally based, service providers to attack
specific areas of the SMB market.”

HP said its Smart Office strategy is solid in that it is focused
primarily on Microsoft operating environments running on HP standard
servers. The company said its internal statistics suggest that more than 90
percent of SMBs run Windows. The company said Linux and other UNIX-based
support is available.

“This is a smart move by HP; trying to address the broader concerns of
their SMB customers by offering more complete solutions,” Forrester Research
vice president Julie Giera told internetnews.com. “The other thing
this does is help HP avoid competing with somebody like Dell just on price.
The affects of commoditization are mitigated a bit when a vendor can package
suites of services, as opposed to selling only a point product, like desktop
management.”

Still, HP must also deal with the current realities of perception. Of the
SMBs surveyed by Yankee Group, 80 percent view Dell as either the perceived
price leader or at least competitively priced. Regarding quality, 82 percent
of SMBs view Dell as the quality leader or maker of good quality computer
products.

Dell is not without its challengers. HP placed second in low price
perception ratings among SMBs and IBM placed second for quality. Dell’s
strength in the SMB market to this point is a direct reflection of its
successful direct sales strategy.

“Companies are absolutely consolidating the numbers of services providers
they are using, and asking those services providers to deliver broader
ranges of services,” Giera said.

Industry estimates suggest it costs a company between 3 percent and 6
percent of the size of an outsourcing deal just to manage that deal. If a
company hypothetically has five different deals: one for desktops, one for
LAN, one for servers, one for WAN, and one for the mainframe, Giera suggests
it takes more money to manage than it is to run the operation in-house.

HP said it would rather an SMB allow them to do some of that
consolidation.

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