As I’ve been reading the trade magazines recently, I’ve paid particular attention to the channel magazines. A big story for several months has been the change in leadership at HP, since Mark Hurd took over as CEO from Carly Fiorina. This change has been met with much interest and concern for two reasons: 1) HP is a VERY BIG supplier to channel and 2) The company that Mark Hurd formerly led, NCR, utilized the channel to a far less extent than HP. So the natural concern is Hurd may steer HP toward a greater percentage of direct business in their distribution model.

CHANNEL PROPAGANDA

It was interesting, especially at first, to watch various editorials attempt to “read the Mark Hurd tea leaves.” This started IMMEDIATELY AFTER his very first press conference, which ANNOUNCED his appointment as the new HP CEO Pinoy Teleserye. The better part of one issue of a prominent channel magazine seemed dedicated to trying to decipher the impact on the channel by interpreting his earliest words. Hurd basically said, “I don’t know yet”. His appointment had just been announced within the last hour, so that seemed to be a pretty reasonable statement! While certainly not universal, many a columnist and channel spokesperson interpreted this simple, honest statement to be a putdown of the channel’s role at HP, with dire consequences certain to follow if this held true. These wags even went on to warn him of how the channel will turn on HP. They pretty much threatened that he had better live up to recent HP channel executives promises to make the channel even more prominent in HP’s distribution model. It’s pretty ironic considering many HP executives will tell you that most of their business already flows through channels, sometime hampering their ability to gather good marketing data. To quote a high profile (and somewhat silly) primetime TV reporter, “I say give me a break!”

The whole thing was really jumping the gun, and frankly quite silly. As Hurd has had a bit of time to study the massive company he is taking over, these same channel players seem to be pleased with his follow-on statements, and the direction they believe he will lead HP with respect to the channel. I got quite a chuckle over a period of weeks reading the various stories. As I stated above, it’s ironic to me, since HP already pushes the great bulk of its $80B business through the channel. While doing this, their business is certainly not optimized, and the key competitor breathing down the company’s throat is Dell. Dell’s direct distribution model is clicking on all cylinders, moving down the line like a Japanese bullet train while attempting to blow HP out of the water. And if HP doesn’t make some fundamental improvements to its business model, it just might happen. You would think it might be wise to examine whether utilizing direct distribution more heavily might be good for HP to study.

Of course, my channel colleagues reading this will want to burn me at the stake for espousing such blasphemy! Go direct–how dare you say such a thing! That is the nature of channel conflict–all parties want the business for THEMSELVES. Much smoke is always blown by the various interested parties about what is right and fair, and commitments that were made and so on, but let’s face it–it’s basically self interest. They just want the business for themselves.

So what’s a company to do? Just sell direct, or just sell through VARs, or just sell through retail? Unless you have strict exclusive territories throughout your distributions system, problems will still arise. You’ll always have some kind of conflict (two direct reps or two resellers fighting over who should have an account), but at least you would eliminate cross-channel conflict, which can be particularly complex and nasty.

Well, limiting yourself to a single channel focus certainly may make your life less complicated, and less rife with conflict. But unfortunately, in most cases, you’ll be leaving a lot of money on the table. If you rule out natural channels that can sell your product, you won’t be maximizing your return on your heavy investments in IP, which should be one of the fundamental concerns of any business.

HAVE YOUR CAKE AND EAT IT TOO

So I say, sell through every channel that makes sense. If done poorly, it can, and almost certainly will, be very messy. You’ll be sorry you did it, and probably become a convert to a single channel, or at least less complex, distribution model. But it doesn’t have to be so. Yes, you CAN have your cake and eat it, too.

There are many potential channels for your products: direct, OEM, one-step through VARs, 2-step through distributors/VARs, retailers, independent sales reps, strategic partner referrals, and more. In extreme cases, ALL of these potential channels may be appropriate ways to deliver your product to the market. The question I am often asked by clients is “How do you make it all work without it blowing up in your face?” The way you can do this is to live by two very simple rules: