HPE headquarters in San Jose (Courtesy of HPE)
HPE Sales Layoff Is Mixed Bag for Partners
October 26, 2020
The server and storage vendor strategy shift will give partners more sales opportunities but will put more pressure on independent performance.
By Larry Walsh
In another sign that the world is permanently changing, Hewlett Packard Enterprise is reportedly laying off its entire North America outside sales team to align with the socially distanced world’s new realities. In practical terms, HPE is shifting its focus to inside- and partner-driven sales.
First, let’s start by saying that HPE hasn’t officially confirmed the layoffs first reported by Chris Mellor of Blocks & Files.
In a statement to CRN, HPE wouldn’t say it’s eliminating its sales team, but did state that it’s focusing “investments and realigning [the] workforce to critical core businesses and areas of growth that will accelerate our strategy” and that the changes would “enable us to become a more agile organization and advance our strategy to deliver everything as a service from edge to cloud so that we can help our customers and partners adapt to a new business environment and harness the power of their data wherever it lives.”
According to the CRN article, the sales reduction in force is part of a bold “doubling down” on having channel partners take on more of the go-to-market opportunity.
Translation: HPE is cutting costs and deferring expenses in favor of partners. Rather than having a mixed go-to-market strategy, HPE will focus on deriving the bulk of its revenue generation with and through partners.
The change should come as good news to HPE partners. It means less channel conflict for enterprise and midmarket deals. And it means opening more of the addressable market opportunity to those partners, which should result in revenue growth and profitability.
But partners cheering this development should pause, as it comes with a catch. The HPE move means more of the go-to-market burden – including expenses – will fall on their balance sheets. And it means more of the pressure of meeting HPE’s financial targets will fall on partners.
The CRN article – which cites several unnamed sources – makes abundantly clear the reasons why HPE is changing its sales strategy: costs.
While industry lore paints the channel as a lead-generation engine, many executive teams perceive that partners aren’t doing enough to warrant the compensation and incentives they receive. As revealed by our annual 2112 Channel Chief Outlook report, nearly one-quarter of channel executives said they’re challenged to demonstrate partners’ value to their C-suites. One reason is that vendors believe partners don’t generate enough business independently.
Again, according to the 2112 Channel Chief Outlook report, vendor channel executives said 66% of their partners were active (had sold at least one product in the past 12 months) in 2019. Regarding their overall indirect revenue, channel executives said 52% of it was generated or originated by their sales teams and not partners.
The figures vary by organization, but the general perception among CXOs is much worse. Some organizations report that vendor-originated opportunities passed or equaled those presented by partners at rates of 80% or higher. These high numbers lead many CXOs to doubt the channel’s value. And this, in turn, is leading many vendors to cull their channel ranks and focus more on just the top-performing partners.
While vendors talk about their respect and commitment to working with partners, the truth is that they almost always hedge their bets against underperformance. Many vendors will have their sales organizations highly manage or shadow partners to drive sales and keep tabs on pipelines. The reason behind this practice, to paraphrase Ronald Reagan, is to “trust, but verify.”
HPE deserves credit for putting faith in its partners to drive more of their sales and revenue. It’s contrary to the direction of many vendors in emphasizing direct and automated (e-commerce) sales.
However, partners need to recognize that this faith comes with the added responsibility to perform at even greater levels than today. If other vendors follow HPE’s moves, it will require partners to invest more in marketing, sales, and customer experience.
Larry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, POD2112, on iTunes, Google Play, Spotify, and other leading podcast sources. You can always e-mail Larry directly at lmwalsh@the2112group.com.
First, let’s start by saying that HPE hasn’t officially confirmed the layoffs first reported by Chris Mellor of Blocks & Files.
In a statement to CRN, HPE wouldn’t say it’s eliminating its sales team, but did state that it’s focusing “investments and realigning [the] workforce to critical core businesses and areas of growth that will accelerate our strategy” and that the changes would “enable us to become a more agile organization and advance our strategy to deliver everything as a service from edge to cloud so that we can help our customers and partners adapt to a new business environment and harness the power of their data wherever it lives.”
According to the CRN article, the sales reduction in force is part of a bold “doubling down” on having channel partners take on more of the go-to-market opportunity.
Translation: HPE is cutting costs and deferring expenses in favor of partners. Rather than having a mixed go-to-market strategy, HPE will focus on deriving the bulk of its revenue generation with and through partners.
The change should come as good news to HPE partners. It means less channel conflict for enterprise and midmarket deals. And it means opening more of the addressable market opportunity to those partners, which should result in revenue growth and profitability.
But partners cheering this development should pause, as it comes with a catch. The HPE move means more of the go-to-market burden – including expenses – will fall on their balance sheets. And it means more of the pressure of meeting HPE’s financial targets will fall on partners.
The CRN article – which cites several unnamed sources – makes abundantly clear the reasons why HPE is changing its sales strategy: costs.
While industry lore paints the channel as a lead-generation engine, many executive teams perceive that partners aren’t doing enough to warrant the compensation and incentives they receive. As revealed by our annual 2112 Channel Chief Outlook report, nearly one-quarter of channel executives said they’re challenged to demonstrate partners’ value to their C-suites. One reason is that vendors believe partners don’t generate enough business independently.
Again, according to the 2112 Channel Chief Outlook report, vendor channel executives said 66% of their partners were active (had sold at least one product in the past 12 months) in 2019. Regarding their overall indirect revenue, channel executives said 52% of it was generated or originated by their sales teams and not partners.
The figures vary by organization, but the general perception among CXOs is much worse. Some organizations report that vendor-originated opportunities passed or equaled those presented by partners at rates of 80% or higher. These high numbers lead many CXOs to doubt the channel’s value. And this, in turn, is leading many vendors to cull their channel ranks and focus more on just the top-performing partners.
While vendors talk about their respect and commitment to working with partners, the truth is that they almost always hedge their bets against underperformance. Many vendors will have their sales organizations highly manage or shadow partners to drive sales and keep tabs on pipelines. The reason behind this practice, to paraphrase Ronald Reagan, is to “trust, but verify.”
HPE deserves credit for putting faith in its partners to drive more of their sales and revenue. It’s contrary to the direction of many vendors in emphasizing direct and automated (e-commerce) sales.
However, partners need to recognize that this faith comes with the added responsibility to perform at even greater levels than today. If other vendors follow HPE’s moves, it will require partners to invest more in marketing, sales, and customer experience.
Larry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, POD2112, on iTunes, Google Play, Spotify, and other leading podcast sources. You can always e-mail Larry directly at lmwalsh@the2112group.com.
