 We're back in Vegas, this is Dave Vellante of Wikibon.org, Silicon Angles Continuous Coverage of the HP Gen 8 announcement. As I say, we're here in Vegas, big news today. But we've got a little storage drill-down segment, we're going to talk about storage, and we're going to talk about the channel, and we've got two great guests to do that, the people who are really fundamental to that business. We've got Chris Riley, who's the Vice President of Enterprise Storage Sales in the Americas. Welcome, Chris. Thank you Dave. This is our first-time Cube, first-time Cube, and Tom Joyce, who has been on the Cube before in Marlboro. Tom Joyce is the Vice President of Marketing, Strategy, and Operations at HP Storage. Tom, welcome back. Thank you. Glad to be here. Good to see you guys. So Tom, we were talking off-camera. It's been two years now since you joined HP Storage. Yep, that's right. You joined HP in 2009, but two years in the storage side. So think back then, and how different it is now. Take us through sort of what's changed in the last couple of years. You know, I think we talked to you guys just around the time that we were starting this journey, and it's been an interesting ride. I mean, coming into HP, we had a very strong profile in storage over many, many years. We've got customers all over the world and a tremendous amount of resources, but we kind of lost our way a little bit and knew we needed to get it back on track. And to do that requires us to get a lot of things right. And the first stop was really to look at the storage portfolio itself. And we got rid of a lot of things that were kind of holding us back and got focused on the right things. And I think at this point, we believe we've got the best portfolio of new technologies in storage. Clearly, 3-par was a big bet. That's a little over a year since we brought that online in terms of selling 3-par. We've got factories all over the world now. We've got a massive amount of growth. We've got channel partners coming online. I think we've grown the total number of channel partners that we have actively selling that have taken orders on 3-par by about 500 percent. So it's going in the right direction. I would say that there is a tremendous amount of excitement in the business right now. I just came back from a meeting last week with our ambassadors, which are our top pre-sales people from all over the world, and it was like night and day. They're really excited about the technology that we have. We do a lot more things. And frankly, we're just getting design wins every time we show up and tell the 3-par story. So it's a pretty exciting place to be right now. Excellent. Well, Chris, they've dubbed 2012 the year of the channel. And I wonder if you can confirm that it really is going to be the year of the channel. Let me talk about the channel. Always literally the word dubbed, but yes indeed, 2012 is the year of the channel. And we're speaking specifically for the Americas. I look across the globe and I see how the rest of HP operates in the MIA and APJ, and their channel model is incredibly strong. And we are really looking to bring that strength of channel go-to-market into the Americas go-to-market plan. So we've, can I talk about what we've announced today? So we've announced today that 100% of all new logos across the entire HP portfolio will be going through the channel. It's probably the most profound commitment to the channel that any storage company has made. And in addition to that, we've also announced that two of our key product portfolios, the P4000, which is the left-hand portfolio, as well as the D2D platform, which is developed internally in HP labs, will also be going through the channel. So when you say new logos, can you just talk about what you mean by what's a new logo? So a new logo is any account that hasn't done business with HP storage in the past. So not a new logo to HP. And the beauty of this program is it really helps promote HP on HP. So the strength in our server portfolio, and certainly Gen 8, I think is going to create a lot of new conversation and a lot of architecture redesign discussions. And we want to make sure that HP storage is front and center in those discussions. So if I'm a channel participant, I get a, there's a big pharmaceutical company that does business with HP servers, but they don't buy any HP storage. Any HP storage that goes into account goes through the channel? 100%. So we're looking for, in those situations, the most qualified storage authorized partner to be able to work with that has the technical capability and acumen in the kind of business model that could really support an effort like that. So can you guys drill down a little bit more on specifically what kind of qualifications you're looking for in the channel? Well, you know, I think what we're looking for is two things. First off, we're looking for our partners to come on and get educated about the products that we have. And we've got a whole line of certifications. We just rolled out an SMB certification for partners that have never done business with us. And a lot of those products that you just mentioned are specifically designed to serve the needs of small and medium businesses. And you can kind of start there and then grow the capabilities to the point where you can do the full enterprise portfolio. So it kind of goes from very simple to very sophisticated. We've also launched a number of programs for how we can help customers actually take the service portion of the business and provide break fix services and professional services. So it's a question of how far you want to go. We're helping customers to work with our channel partners and to a greater extent than whatever we have before. We want channel partners to come to HP and say, look, this is a company we want to line up with. We're going to make an investment in HP. And what Chris's team is doing in the Americas is saying, if you make that investment, we're going to guarantee that these new accounts are going to go to you and these products are going to go to you. You can build a business here. You can count on that revenue stream. You can count on us to help you get there. So I want to come back to the services in a minute, but I really want to understand this announcement. It's a pretty big commitment that you guys are making. 100%, I think means 100%. I get that. What percent of the business roughly today for HP Storage goes through the channel? Yeah, I don't think that's a number that we historically have broken down at the region level. But as Chris said, in many parts of the world, HP's been doing channel for a very, very long time. I mean, they've been in China and many parts of the Far East and for a much longer time than anybody else in the industry has been. So we have very high rates of channel sell-through over there, less so in the Americas. The Americas, we've been very direct touch and for a lot of these products and customers, that's what was required in the past. And what we're seeing now is that the breadth and depth of the channel, the resources that they have have grown to the point where those are partners that can do a lot more than they could do 10 or five years ago. And so we're asking them to come over to HP. We want to take partners that are not happy doing what they're doing somewhere else, not happy with the economics, and come here and sell these new products that we got. So it's kind of a big land grab going on the channel right now, isn't it? I mean, there's a lot of acquisitions, right? You guys made some acquisitions, Dell made some acquisitions, even C made some acquisitions. And so a lot of the guys that were selling almost exclusively through the channel got bought up by companies that had a mix or in some cases, you know, were 100% direct. So what's going on in the channel? Can you talk about that a little bit? So the portfolios are broad. As you look at converged infrastructure and selling the entire stack, it becomes a more prevalent sale and the conversation is much more around that. The channel partner today has to be more sophisticated in its domain expertise. You can't be a server-only, storage-only, network-only partner because you're gonna miss out on some of the key value propositions that are associated with the converged infrastructure. So for us, we view the channel as a journey and that journey starts with a commitment like the one we've made and then the opportunity to sell with the channel partner. So while certifications and authorizations are important and oftentimes a leading indicator of success, we know that it may take someone who's very proficient in networking or server to become proficient in storage. And our commitment to the channel is not, you take this business and HP will continue to take this direct business over here. We have field sales reps and by definition, that's a sales rep who's responsible for territory and driving the business within that territory. And a key component of that is driving that business in a sell-with sales motion using our essay support and technical support and consulting expertise to help mount a successful campaign. How big is the contract for this 100% channel initiative that you guys are signing? Something that was like a hundred pages? No, it really isn't. It's a one-pager. It's a one-pager, really, for real. Anything harder than that is really, probably doesn't have a lot of teeth as it gets down to the street level. Now this is very simple. I mean, you're kind of poking around looking for what are the restrictions. Yeah, what am I missing? The reality is, here's the deal. We want people to come on board and what's in it for them? I mean, as Chris just said and as you just said, it's gotten complicated for channel partners. If you're in the Chicago market and you're a medium-sized bar, there's probably 50 or more other medium-sized bars selling storage in the Chicago market. So you've got to pick who you're gonna line up with and most of these folks come to us and say, look, we want predictable and we want trustable. And I think in the past, we've probably been less predictable than we would like to be. So we're trying to make this as absolutely crystal clear as possible. If you find an opportunity for a net new account, we're gonna line up with you and you can guarantee that you're gonna have that business and all the net new accounts you bring on board. And it's a very simple thing. You don't need 50 pages or 100 pages to sum that up. Yeah, the channel doesn't like to get head faked and they've been head faked. Let's face it in this industry in the past, right? The vendor comes in and says, oh, we love the channel. And all of a sudden two years later, rug gets pulled out from underneath. So what do you tell the channel who do they ask you to say, oh, hi. What am I missing here? Like I'm saying, I'm a skeptic. How do I know you're not gonna pull the rug out from underneath me in six months after I let you into all my accounts? What do you tell that guy? Yeah, so we've done our due diligence here and we've spent time with the five distributors we use here in the Americas and vetted this whole process and this approach. And we really went through the kind of detail you need to cover when you have a campaign like this. In addition, we have the good fortune to have a very strong enterprise advisory council. So we've had frequently asked questions might be, how about the field engagement? What about a deal that was priced before and might move to an indirect motion moving forward? So we've got those details worked out. I'd say over the next 30 days, it's gonna be a concerted effort on both our parts to educate our collective teams. But at the end of this, we will come out as a stronger end-to-end field selling motion with our partner community. And I think garnering the lion's share of mind share which is really difficult in this complex market we live in today. How will the certification for the channel participants differ from what you would provide to your own internal sales reps? That's a very good question. We actually have a completely separate organization that just does channel training and certification. So when we bring a product out in the scope of HP, I mean you're talking about the largest IT company in the world, there's a lot of people that we have to go educate and train. So the core content that we might create to provide technical training on a 3-PAR or any of these new products that we're doing has to go to our certification and learning group. It has to go to our sales L&D group. It has to go to our TS training group. It has to go to all those places around the world. So we actually start this process well in advance of bringing any new product out. And most of these channel partners that we're dealing with are familiar with different parts of that process. And again, as I said earlier, it can kind of go from very lightweight certifications, things like if you're selling somebody else's product today, we can kind of fast track you through the process of getting up to speed on our products. And then you can actually make a much more significant investment. Now I think, again, if you're a mid-sized bar in any one of these cities, you're really looking at your balance sheet and trying to figure out how much of my people's time do I want to invest in training before I see a result. And so as Chris said, a lot of this over the next couple of months is going out and showing them. Showing them that we did make this announcement and now we're doing these things to actually get you up to speed. And selling with them is a key part of that. Are you mentioned services before? So where does services fit into this whole equation? Yeah, so services is an interesting phenomenon for all of us right now at HP. You might have noted that a number of months ago, the company made the decision to combine our enterprise server storage networking business with our TS business. And those two things reported up separately before and now they all report to one person and that person is our mutual boss, Dave Donatelli. And that happened six months or so ago. And since then, we've started to see some significant changes in terms of how we approach this part of the go-to-market. We started a program called Service One about six months ago and that gave us the ability to go from just really selling, having a channel partner go sell our products and resell our service and support with HP's brand on it to now being able to sell our products but sell our support but also do the break fix themselves. And that model would have been HP branded support but they would have had the opportunity to participate in the revenue and profitability from that. What we announced here today was a third way to do business with us on service and support and that's where they sell HP's product but they can do all of the break fix and they can do professional services as well with their own brand so it can be partner branded. Now, why is that important? If you're a channel partner, you want to be able to provide custom services to your end customers. You also want to propagate your own brand. You want to build your brand. You don't just want to be a pass through for somebody else's stuff. And many of the larger partners in particular have been asking for this for a long time. Many of the end customers have been asking for it too. I mean, they want to basically have custom offerings and they view that channel partner as their primary relationship. Now, I think that not everybody's going to do this. Many of the channel partners are perfectly happy to resell our services and support and they like having our brand on it but a lot of them want to do unique things and we're giving them the opportunity to do that. So again, this is a big commitment. It's certainly a commitment of dollars and resources on our part to make sure that we can backstop their service and support with quality. It also means that we're giving up some profitability to those partners that want to do this. So if they lock in with us to go sell these products, they make the investment to build those services offerings. They make some significant money. We get a very strong partnership out of it. So that's what the new service went off. So make sure I understand. So there's three models if I understand it. HP branded and HP delivered as a, I'm a pure reseller of your services or as a hybrid HP branded and I can deliver it as the partner if I want. Or this new model that you're announcing today is partner branded and partner delivered. That's correct. Okay, great. And it'd be interesting to see how that shakes up in the channel, how the mix goes. Yeah, I think it's going to be interesting because nobody else is doing that in the market. Yeah, that's new. 100% channel commitment is kind of new. It is new. We exposed the team to this today. The EPAC team this morning gave them a pre briefing and there was a standing ovation. So a few folks that represent multiple storage providers said this is the most profound commitment to the channel they've ever seen. So it's not only new, but I think it's going to kind of allow us to capture the mind share that we need to really grow our business and grow our market. Well, the reason I like it is because like I said, there's a land grab going on the channel and of course everybody's throwing MDF funds at the channel and that's the sort of standard way you do it, but this really shows a different type of commitment and it talks to profitability, which is what they really want. And what Tom mentioned predictability. So when a channel partner engages in a new logo pursuit, it's an expensive venture. And they want to make sure that when they really go to settle on an architecture, they believe is right for that client that they have a predictable model from the vendor. And that's why we've said, if you're going to make that commitment to go after new logos, we're going to commit to you that if you partner with HP, those go through you 100% of the time. What's the channel telling you about the cloud? The cloud is scary, I would think for a lot of the channel. But wow, I'm going to go to some service provider and buy all these services. If I'm a channel participant, I like to sell boxes and hardware and software and services on top of that. What are you seeing out there? What are they telling you? You want me to go first? Sure. Yeah, I mean, we're seeing, again, the channel is a diverse thing. There's all kinds of channel partners in the world from the very small, the very large, some specialized in different areas. So we're seeing quite a few companies, again, they've gotten more sophisticated over the last decade or so and they've had to to survive. So the ones that are doing well have a lot of resources. And many of them are actually doing cloud solutions of their own, some of them are providing private cloud solutions and that's where our cloud system and virtual system offerings are doing quite well. Some are actually building services or reselling somebody else's cloud services and various different combinations. And we actually have a program that was pioneered at 3Part and we've made it an HP program called Cloud Agile. And Cloud Agile is a way for us to go work with channel partners and services partners to go to market driving cloud solutions together. And again, there are all kinds of ways that that can be done. I'd say the ones that are afraid of the cloud are the ones that are probably going to have the hardest time surviving over the long haul. The ones that are embracing it, whether it's SMB or enterprise or services, those ones are actually doing very well. So you think it's a real opportunity for the channel? It's a huge opportunity. Bring forth pre-sale services, consulting, maybe even security services all the way through the end. Absolutely and we're seeing scenarios now with cloud system, which has only been out for nine months or so, where we go in and we engage with a customer about orchestration or how they're going to manage their private cloud, have that discussion. A lot of that is consulting led and it flows through for that channel partner to provide all kinds of back end hardware opportunities. And we're seeing an increasing amount of 3Part getting sold into those deals. And that's what the customer that wants. That's what the channel partner wants. So I want to have a higher level conversation and become more important to the end customer. Now we're here at the Gen 8 announcement, of course. Now we've been in the storage business, the three of us for a long time now. And- You're longer than us. Yeah, well, of course, a few more gray hairs. But you guys are in the front line, so it adds up. The interesting thing about this announcement that I saw is one of the key pillars that HP is talking about is data growth. So now you hear the compute guys talking about the ripple effects of storage growth on their business. So what does Gen 8 mean to you guys from a storage perspective? What means a number of things? I mean, since we kind of started this journey we've been talking about how we kind of recast our product offerings, we made a couple of big bets. And one of the big bets was that we're going to go focus on converged infrastructure and what we called that within the storage business was converged storage. And we basically said that going forward with all of the new products that we build, they're going to have kind of three things in common. And the first is they're going to be built on industry standard architecture. And we happen to have Proliant and Blade System who build controllers that can be used for a variety of things including storage. So we've got the best controllers in the world. So we're going to leverage that stuff. We're going to leverage all of the management capabilities that are inside them which are very significant and actually grow with Gen 8 a great deal. And then we're going to focus our attention on building data services software. So what 3PAR is, what left hand is, what iBrix is, as well as Store 1's backup is data services run on top of industry standard architecture. So they take advantage of all the capabilities of HP. So if you look at Gen 8, what does Gen 8 bring us? Well it brings us, I'm not going to go through all of the capabilities, but it brings us the most modern server technology in the world. Gives us a lot more capability in terms of power and cooling management and all of those things. And it gives us the ability to build modern storage platforms to take advantage of that. We're not going to be like some of our competitors running on, they might be running on industry standard architecture, but they're two or three generations behind. We're not going to be running on proprietary architectures like some of our competitors. So it gives us a big leg up just starting out of the box. And so you will see over the course of the next couple of quarters, a rolling thunder, I guess you call it, of product announcements of things we have today that are now available on Gen 8. So that's a huge opportunity. It gives us frankly more power than we had yesterday. So your strategy is to layer storage services on top of these industry standard architectures and add value up the stack. And as you kind of move to a world that's about scale up, instead of scale up, that's where you want to be. You want to scale out with blades, you want to scale out with modular servers. The days of the kind of two controller storage proprietary, that's over. And so this gives us, gets us the place we want to go. All right gentlemen, industry first, 100% channel initiative, bold moves by HP going after the channel hard. Chris Riley, Tom Joyce, thanks very much for coming inside theCUBE. Appreciate you guys coming up. Transforming the market that we know and have led for the 22 years. Thanks for watching everybody, we'll be right back.