Matthew “Matt” R. Smith is the director of marketing for HP’s Solution Partners Organization (SPO). Smith brings experience and expertise in market research and analytics for partner marketing, digital marketing, sales development, and incentives. Smith spoke recently with ChannelPro-SMB publisher Michael Siggins about where form factors are going and where channel partners can find opportunities.
ChannelPro-SMB: Talk about form factors and where they are going. We see transitions happening at record paces, and the number of different products is exploding. Netbooks became 15 percent of the market in a day, and went from zero to 15 and back to zero.
Smith: It was at record paces. You see the same thing with Apple. [The iPad] ramped up [and] everybody’s got to have one. You haven’t seen them go down. But you’re seeing more products and seeing people trying new and different things. Our expectation is you’re going to see a lot more trialing of products. Is [the preferred form factor] going to be the tablet? Is it going to be the hybrid? One thing that’s consistent is people want lighter, faster, better battery life, and cheaper [prices]. That’s just the way we’re expecting things to go.
A lot of the restructuring we’re doing [at HP] is about integration and consolidation of products. [Here are] a couple of different examples. The Spectre [is a] consumer product that we’ve had for a long time and] turned it into an ultra-thin form factor, so it’s now the thinnest and lightest. And then we just announced the commercial version. So there’s now a Spectre [ultrabook] for consumers and a Spectre for commercial [users]. It’s got the TPM [Trusted Platform Module] security chip, commercial quality, reliability, [and] warranty on it.
So here you see a consumerization of IT, or at least an integration between a consumer product and a commercial product. You’re seeing that across the board. Ultrabooks are in the same camp. Tablets are doing very well cannibalizing some of the notebook business. Now you’re getting these ultrabooks, which are starting to get more interest [as the] lightest, thinnest [PC] product out there.
Come the end of this year you’re going to see a hybrid version. You’re going to see ultrabooks that the top snaps off. It acts and looks like a notebook, and then it acts and looks like a tablet. It just depends on the configuration. [We have] big expectations on this. We’re going to have multiple products that come out. Some are going to be ARM [processor based], some are going to be x86, and all will be available around Windows 8, with some of them backwards compatible. But they’re going to offer the best of both worlds.
I’m expecting big things out of it. You look at [the] tablet market today; most people are carrying around a keyboard with it, right? You can get the best of both worlds [with a hybrid] with 10 hours of battery life and have them both together and operating in whichever model you want. I’m pretty excited about that.†
ChannelPro-SMB: These form factors change, and come and go rapidly. There’s a lot of pressure on you to create the hardware that people want, and there’s a downward pressure on pricing. What are you hearing from your partners about hardware margins and the opportunities? What else can they do to wrap profit into the sales? †
Smith: It’s a good question. There’s no question the revenue opportunity is going down, [and] the margin opportunity is going down. I think there’s a lot more money to be made in the amount of products that are sold. A 25-person company doesn’t have 25 desktops any more. They’ve got 25 desktops. They’ve got 10 notebooks. They’ve got a bunch of tablets. Part of it has to do with proliferation of products. There’s going to be more money there. And it’s coming down to servicing of the products. They’re going to maintain a certain amount of margin on the hardware, no question about that. Every day we try to bump it up.
I can show you historically we’re slowly inching that up. But the difference is between 4Ω to 5 percent. It’s not sending anybody’s kids to college. Where [opportunity] comes in is the management side of it—the recurring [revenue], being able to add the cloud, †and being able to add 10 different devices to each individual user versus one specific plug. On the program side still there’s a lot of opportunity. There are so many people that are focused on being out driving the sale that I do think there are a lot of partners that are leaving money on the table that they deserve.
In my next life I believe I could be a consultant to our partners, educating and showing them where some of those opportunities are. So while we tell you the margins are thinning out, I’d say you’re going to make it up on the volume. But I still think it’s an opportunity to take a little bit deeper look into partners’ programs and maximize the dollars. It’s one of [the] HP value props that I tell people all the time, which is your clients are going to want more variety. They’re going to want more products. But they’re going to want it in a simpler fashion. One of the big things that I think [you can] do [is] focus in on a vendor—hopefully that’s HP—and go deeper.
That allows you to take advantage of more and more of the programs. Get some value when, say, if you sell a printer and a desktop it’s a greater value than the two of them [individually]. But you’ve got to go a little bit deeper. You can get all of that from us, and you can get one of the richer partner programs because of that.
ChannelPro-SMB: Let’s say I want to get into the channel as a reseller or a service provider. I’m brand new; a blank slate. What’s your elevator pitch on where to focus?
Smith: It’s all about recurring revenue. I would focus in on building out some of the data center, some of the NOC [network operations center] services. And based on your cash flow, you literally can service and manage that entire environment with little to no cash flow out of your pocket. You don’t need to take title any more. That product can be purchased through HP [and] dropped off at [the customer] site.
Look where the ball’s going. The ball’s going to recurring revenue, a service-based model.
