Channelnomics

 

HP Making Big Moves to Penetrate Clouds

Share This Article:
Facebook Twitter Linkedin Email

Hewlett-Packard hasn’t been shy about its cloud ambitions. It has the hardware to make private and public clouds. It has software for managing clouds. And it has professional resources for designing and implementing clouds. It’s now moving to turn on the channel to build a cloud ecosystem that envelops the market with cloud solutions.

At the Global Partner Conference in Las Vegas today, HP revealed its commitment to becoming a leader in cloud computing by announcing changes to the PartnerOne channel program that incent and support solution providers that design, build and service cloud computing.

The cloud initiatives, many of which won’t take effect until later this year, are precisely what you’d expect from a vendor. There’s a Cloud Builder specialization for solution providers who develop and support cloud infrastructure on HP hardware and software. There’s the new “HP Interchange,” a walled garden partner social network designed to help solution providers to connect with peers to form complementary working relationships. And HP is unleashing a host of training programs and services to help partners develop cloud practices build on the HP hybrid cloud strategy.

What’s most interesting is HP’s willingness to address the entire challenge of cloud economics and ecosystem through incentives. Essentially, this means HP is willing to pay partners twice for selling the same cloud service.

A big thorny issue facing vendors in the cloud era is market aggregation. On paper, the cloud looks like a great bargain for a vendor like HP that sells hardware and software. Service providers – carriers, telecos, large integrators, and cloud companies – will buy HP servers, networking and storage gear, as well as cloud management software for the delivery of downstream cloud services to resellers and end users. To the vendor, this means the addressable market has shrunk from tens of thousands of customers to a handful of service providers with a minimal loss of revenue. That loss is more than acceptable considering the reduced cost of sales of supporting fewer customers.

The rub, as it were, is vendors like HP are in the cloud era are wholly dependent on the growth of those few service provider partners for their own growth. For instance, HP sells $1 million of gear to a service provider, and that gear is serviceable for three years. If that service provider adds no customers or services, HP’s sales actually decline for the subsequent two years. Even a minimal organic growth will result in HP sales being relatively flat.

The cloud market aggregation conundrum is something every vendor like HP is facing, and few have unraveled the mystery of how to deal with it. Service providers in the cloud are not partners, but rather customers. So what responsibility does a vendor have in growing the sales of a customer to ensure their future sales?

HP is going where few other vendors are willing to go: paying downstream resellers for referring business to its CloudAgile service providers. What this amounts to is an incentive to keep cloud business within the preferred HP family. HP tells Channelnomics this program is intended to accelerate cloud adoption by promoting services through its extensive network of resellers and solution providers, while simultaneously driving business to qualified and loyal service providers.

It’s an interesting notion of paying for a customers’ growth so they will buy more gear and software. HP acknowledges to Channelnomics that this approach will be expensive, but worth the cost if it grows its service providers and solution providers’ cloud business.

Other vendors have looked at more direct incentives to service providers, such as providing market development funds and funded business development programs. Conventional approaches often run into roadblocks because the expense robs from the profitability of the service provider revenue stream. And, logically speaking, isn’t the service provider responsible for their own growth?

What HP is essentially doing is more than just incenting business referrals, but underwriting the development of its service providers’ channels. The incentives to CloudAgile partners should result in reseller relationships between service and solution providers, which should result in increasing and sustained business throughout the HP cloud ecosystem.

The HP CloudAgile incentive program is a bold move. If it works, it could provide a blueprint for accelerating cloud adoption and growth throughout the channel.

Related Articles:

Leave a Reply

Spam protection by WP Captcha-Free