Power Tools 1993 November - Disc 2/Power Tools Plus (Disc 2 of 2)(November 1993)(HP).iso/hotlines/cnhl/3year.txt/SCRIPT.TXT

Text File | 1992-12-11 | 41KB | 932 lines

             CSO/AMERICAS
          3-YEAR SUCCESS MODEL
             "WHITE PAPER"


PREFACE

The following document covering the details of the
CSO/Americas 3-Year Success Model is a transcript of a
presentation given to the sales management team in
September.  It is not formatted like a formal "White Paper",
nor is it intended to be used externally as a slide
presentation to customers.


It's purpose on the Hotline is to provide people in the
CSO/Americas organization details on the data analysis and
philosophy behind the new sales organization structure.


CSO/Americas 3-Year Success Model Overview Presentation -
September 1992


AMERICAS SALES ORGANIZATION - OBJECTIVES

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The CSO/Americas 3-Year Success Model was introduced in
FY'92 to move toward more of an account and industry focus
within the field organization, while strengthening our
channels and partners within the field organization.  We
started moving in that direction in FY'92, and we really see
FY'93 as just a continuation of that -- a continuation of
focusing on those concepts, organizing around accounts and
industries, and strengthening channels.

.PA
As we continued to develop our plans for how we wanted to
move forward in FY'93, Franz Nawratil asked us to get
together with our European counterparts, so Keith Goodwin
and Alan Nonennberg got together with Frank Barker and Rudy
Lamprecht and shared our ideas and experiences in FY'92;
what we thought was working, what we didn't think was
working, and it was really interesting because we learned a
lot of the same lessons in '92. We actually did a lot of the
conceptual development work for this organization together
with Europe, and we are really in agreement on all the
principles and pretty much everything you are going to see
here.


So the good news is that this is the organizational model,
not just for the Americas, but also for Europe. And that
means as we try to look at accounts globally, look at our
partner relationships on a global basis, we will be able to
have a lot more consistency between what we are doing in the
Americas and in Europe.


We also shared this organizational model with the team from
Asia/Pacific. I think they are buying into a lot of the
concepts, but they have some unique considerations, relative
to geography and some of the countries they have to deal
with. So they're not moving quite as quickly in implementing
this model as Europe is, but I think conceptually, over time
they're going to move in that direction.


FY93 CSO SALES MODEL

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Structurally, the sales organization for next year will
consist of three major pieces.  An ACCOUNT focus, organized
by industry; a GEOGRAPHY organization; and a channel
PARTNERS organization. And if you think about it, you've got
this set of customers out there and the accounts
organization will be selling to that customer base; the
geography organization will be selling to that customer
base; our partner sales team will be selling to partners who
will also sell to that customer base; and there are
obviously points of intersection where the partners will be
selling with the accounts and within the geographies.


Conceptually, that is what we are going to talk about today.
The presentation I am going to go through is really in three
pieces -- the account piece, the geography piece, and the
partners piece. I'm going to get into a fair amount of
detail in all three of those. To make it easier to discuss
the three segments of the sales organization, we have
assigned color code names for each segment:  RED for the
account teams, BLUE for the territory teams and GREEN for
the channel partner teams.  I am going to start with the
accounts piece, and I will probably refer to that quite a
bit from here on out as the "Red organization".


FY93 CSO SALES MODEL

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INDUSTRY ACCOUNTS ("RED") ORGANIZATION


Focusing on the Red organization, I'm going to take you
through some of the rational behind that organization.
Starting off by looking at some of the trends we've
observed, not just in the last year, but through the decade
of the '80s. We've looked at our customers more and more.
Our customers are recognizing that they have a need to
compete on a global basis in order to achieve their growth
objectives, and with the realities of this new global
economy, companies are recognizing that they need to be
competitive globally.


The Japanese are recognized as being very successful in
competing on a global scale, and one of the things the
Japanese have done very successfully, is reduce the number
of suppliers that they are working with. Not just in IT, but
in all facets of their business. And then they've attempted
to develop much stronger relationships with those supplier
alliances and partnerships.  We see a lot of our customers
moving in that direction, both from an IT perspective and a
non-IT perspective.


I think more and more of our customers are recognizing that
IT can be a strategic weapon in achieving these goals,
trying to become more competitive globally. We see the
momentum building as customers think about IT.  One of the
things we also observe is, in this new open systems world,
we are going to need to differentiate ourselves much
differently then in the past.  We can't continue to
differentiate ourselves the way we have in the past with
hardware, software, those kinds of things. We need to
differentiate ourselves by services, and really adding value
to our customers and their drive to achieve these other
things.


ACCOUNT MANAGEMENT

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So based on those trends in FY'92 we implemented a pilot
program. I think all of you are familiar with the pilot
program - the Global Account Program. And in the Global
Account Program we tried to apply these principles to
address the trends that I have just talked about.  In the
Global Account Program  we can focus on a specific customer,
develop an in-depth understanding of that customer's needs,
and not just from an IT perspective, but to really get in,
to understand what a customer's business objectives are,
critical success factors are, and then attempt to
differentiate ourselves within that account by adding value
to their achievement of these business objectives and
critical success factors. The global accounts program really
allowed us to look at each account as a "marketplace" to
determine what kinds of resources do we need to grow that
relationship, and where we need to most effectively deploy
those resources.


Typically, in the past as we've tried to grow our business
by say 20% the tendency was simply to add some more sales
reps.  With the new account focused organization structure
we can look at what our growth objectives are and determine
the best mixture of resources.  We can stand back and assess
whether or not we need more Sales Reps., PSO, or Marketing
resources that meet the need.  And we have the flexibility
to add the right kind of resources, and in the right
locations. Not just investments at the account headquarters
but also across the Americas, or Europe, or Asia Pacific to
grow that account, as a market.


Relationship selling is another key within global accounts.
If you think back to the trend I presented earlier of moving
to fewer suppliers, stronger partnerships, and alliance type
relationships, it's really the relationship selling at high
levels that needs to be done in order to achieve that
objective.


And finally, we would like to view our performance in the
global accounts as we would in running a business.  We will
certainly look at our business on a month-to-month, quarter-
to-quarter, and yearly basis, but also recognize that we
really want to measure ourselves on the long-term growth of
that account. To try and put some measures and goals in
place, and look at an account not simply from an annual
perspective, but also from a three and five year
perspective. So that we are growing the business,
profitably, as measured by this thing we call the Selling
Cost Envelope.


We implemented these principles with the Global Account
Program. The idea was if we did these things, we believe we
could grow these accounts faster then our overall business,
and at a lower Selling Cost Envelope.  And through the month
of August we are at about 42% growth with our eleven globals
in the Americas and about a penny and a half under our
overall Selling Cost Envelope. It seems to be working, and
as we think about the Red organization that I have talked
about, the goal for the Red organization is to apply those
same principles to an expanded list of named accounts.  You
really want to focus on accounts, by the principles I just
talked about, and then organize those accounts within an
industry structure. In fact, the model looks something like
this...


.PA
CSO AMERICAS SALES MODEL - ACCOUNTS

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Approximately 800 accounts will fall into the accounts
organization.  If you look at our business today, and this
is based on FY'91 data, about 200 accounts in the Americas
represents about 60% of our business.  The significant thing
however, is that within those 200 accounts, our average
market share is less than 7%.  Applying the principles that
I just talked about on these 200 accounts, if we could
double that market share to 15%, you could see the kind of
impact that could have on our business. The troubling part
of that is if we double our market share within these
accounts and get the 15%, I'm not sure we're yet a strategic
partner within those accounts. I'm not sure if 15% really
earns you that right.  The concept here is that we are
really trying to focus on significantly increasing our
market share within those accounts.


The second part of the model is if we are going to be
successful in these very large strategic accounts within
industries, we want to be able to take and leverage what
we've done in those accounts -- our knowledge, our
expertise, and our successes to some target set of large
companies that are also in those industries. That represents
about 600 accounts that we are calling Target Major Accounts
-- very large companies. The idea is to significantly
increase the size of the market, and overall, by focusing on
800 accounts representing 60 - 70% of CSO's business.  We
think this kind of a strategy will imply the kind of growth
that I talked about earlier - a growth rate in the named
accounts that is higher than our overall CSO average.


I want to re-emphasize that the idea behind the Red
organization is first a focus on accounts, and then an
organization by industries. A little bit different than
saying we are going to focus totally on industries, and
everything within that industry falls into that
organization.  This is a focus on accounts organized by
industry.  We have selected certain industries that we have
competitive strengths in, then we've organized these
industries into three industry groups. The first industry
group is Discrete Manufacturing, headed up by Bob Sudkamp;
the second industry group is Process/Financial Services run
by Jerry Tartaglia; and the third group is the Telecom
Industry Group run by Bob Stringer.


Account focus, organized by industry.  Hopefully those of
you that have had an industry focus this year will recognize
the value of being organized by industry.  We think there
are some definite benefits to doing that.  Going back to the
concept that we want to differentiate ourselves by adding
value -- one way you can add value is through knowledge and
expertise, which you gain through industry focus.  In this
kind of organization, we think we can much more efficiently
direct a product focus, our marketing resources, understand
what our partner requirements are, and what our training
needs are.


The other thing an industry organization allows us to do is
better focus on the development of target accounts, which
really has been an area of focus over the year. We all have
been in that position, I think, where we've got this target
opportunity, but we can't really get all the resources we
need; people are on us for quotas for this month -- how can
I worry about quota this month and develop this target
account, when it may take two years to develop?


In this new organizational structure we are not going to
have any more money to invest in these target opportunities,
but we think we can better FOCUS on fewer opportunities that
are strategic so that the dollars can have a greater impact.
So rather than having a small amount of dollars spread out
over the entire organization, we can focus those dollars on
a smaller number of accounts, target opportunities, and
really have an impact on these accounts.


As a final benefit, this industry organization structure
eliminates the geographical bias, at least within the U.S..
It is a national program across the U.S., with no Region
boundaries to impede the appropriate deployment of
resources.


Those are the major benefits of the industry organization.
If we think about the Red organization again, what we are
really trying to do is first of all maximize the sale of HP
products and services to these defined 800 accounts using
all of the available channels and partners. We are going to
spend a fair amount of time talking about the interplay of
the channels, as this somewhat of a new concept.  If we
really want to move toward an all channel strategy, you
think of an account sales rep -- their objective is to move
as much product into that account as they possibly can.  We
think they're going to do most of that business direct,
approximately 80%, but more and more, over time, this is
just going to move into the indirect channels.  So we want
to make sure those people are compensated in a way that
makes them channel neutral -- not totally channel neutral,
but as close as we can get.


The Red organization industry groups will be managed on
Selling Cost Envelope.  The idea is to really focus on
market share.  We are going to continue to use the Account
Management Process (AMP) that many of you have some
experience with. Relationship selling, creating demand.


What I'd like to spend a little time on is to give you kind
of a feeling for the analysis that has gone into the
selection of the industries, the selection of the accounts,
and the kind of information you can derive from that type of
analysis, and then how you can apply that information to
product focuses, market focus, and the deployment of our
sales resources.


Rocky Gunderson and his industry marketing team really
deserve a lot of credit for the detailed analysis they have
done.  They spent a tremendous amount of time putting this
information together, and I think you will see the value of
it.


We started by taking a look at worldwide IT spending by
industry, trying to characterize the different industries --
what kind of IT spending they have, both today and where it
is going in the future.  Breaking that down by our field
operations, breaking that down by specific industries, and
accounts within those organizations.  Segmenting, actually,
those industries and accounts into segments that make sense,
and trying to understand how they leverage, and then doing
the analysis of overlaying product focus, marketing focus,
and sales resources.


What I would like to do is walk you through an example of
one industry to show you the process that was used for all
of the industries. This next set of slides you are going to
see focus on the Automotive/Heavy Equipment industry, but we
have the same analysis and same data for all the industries
that I showed you earlier.


.PA
AUTOMOTIVE/HEAVY EQUIPMENT INDUSTRY - CSO AMERICAS ORDERS

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The first thing we did was try to take a look at who are the
big companies within the Automotive/Heavy Equipment
industry.  So you can see, these are the 17 largest
companies as characterized by their IT budget - an estimate
of HP's market share within that overall budget.  This is a
capital expenditure budget not a whole IT budget.  Then we
tried to map that on how we classify accounts this year.  A+
accounts are globals; A's are majors; Alphas are target
majors; and then the B are other assigned accounts.  This is
just kind of a snapshot, this started six months or so ago
to try and take a look at where we are at today.


OVERVIEW - AUTOMOTIVE/HEAVY EQUIPMENT INDUSTRY

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The next step was to go and segment that Automotive/Heavy
Equipment industry into three segments. Automotive, heavy
equipment and suppliers, and then classify them in the
appropriate classification.  The purpose of doing this is
you really can get some leverage between these different
segments.  For example, what you do in the Automotive
companies has tremendous leverage to the suppliers for the
automotive industry, and visa versa.  What you do
successfully with the suppliers many times can leverage back
to the Automotive industry.  So that is very valuable data.
We have taken those segments, those accounts, tried to
characterize this and that from a revenue standpoint, from
an IT standpoint, both what it actually was in '91 and what
it is projected to be in '94.  Then an estimate of what we
think CSO's cut of that is today, and what it could be in
FY'94.


FUNCTIONAL DETAIL - AUTOMOTIVE SEGMENT

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We've broken it down by segment, I'm going to take one of
those segments, Automotive, and the next step is to break it
down by application.  So we have the Automotive segment
broken down into R&D, Manufacturing, Logistics, Marketing,
Sales and Support.  You can really do some interesting
things with this information.  First of all you could take a
look at R&D type applications of this Automotive segment and
ask, "Who are the partners that we need to be successful in
that segment?".  The "U" in this case indicates that those
are partners that run under UNIX, or their solutions run
under UNIX.  You will see some that run under MPE, denoted
by an "M".


What this matrix shows is a list of the key solution
partners that are required for success in the Automotive
segment, broken out by functional application area.  Then it
shows the product emphasis (or potential) by Platform.  For
example, you see that the HP 3000 really has low overall
potential within this Automotive segment. But now if we take
a look at the supplier segment, and perform the same kind of
an analysis, we can see, for example, that the HP 3000 has
high potential in Logistics within this segment. Now if you
look at the major solution providers that we have today in
the Logistics segment; but they are all under UNIX.  So if
we are really going to go after this segment and deploy
resources here we are going to need to potentially recruit
HP 3000 solution providers.


For each of the industries, we went through this kind of an
analysis.  The benefit of all of this is that, as we start
to move into this new organization, the industry group sales
managers and marketing managers can work with this to allow
them to better deploy the sales resources and tie our
marketing efforts and sales efforts together -- something we
haven't done so well in the past.  This will be a tremendous
advantage as we move forward.


These industry matrices can also be used to analyze product
platform fit, marketing program impact, and channel partner
requirements by industry -- an extremely valuable tool for
the sales and marketing teams.


This data was also very useful as we began to make decisions
on which accounts to focus on within each industry group.
As a rough rule of thumb, we really felt that for most of
the industries we should probably start by looking at
companies that are a billion dollars in revenue and above.
Because if you analyze it, it's really about the billion
dollar mark that they tend to generate the size of IT budget
to generate the kind of potential for us to feel like we
want to put it in this organization to get a million dollars
a year plus, on a sustained basis.


CSO/AMERICAS ACCOUNT SEGMENTS

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Thus, the starting point was  the billion dollar companies
within those industries, and we built it from there. In
fact, when we were putting the organization or putting the
account structure together, we tried to characterize what
each of the industries might look like from a number of
accounts standpoint, and dollar/revenue standpoint. These
are the industries you can see for example, Automotive and
Heavy Equipment that accounts for about $128 million sales
dollars and that Electronics Aerospace is $234 million,
based on FY'91 sales figures.  The total of 718 accounts
across our focused industries account for approximately $907
million in sales.


Then we tried to break it down by looking at companies with
revenues greater than a billion dollars, HP sales greater
than $100K -- these tend to be our established major
accounts, global accounts. Greater than a billion dollars
revenue, less than $100K sales -- these would be more the
target type opportunities.  We then recognized that there
are accounts that may not be quite a billion dollars, but
clearly belong in this organization.  So we tried to
identify those.


Then this final column on the far right of the slide
represents the international accounts international major
accounts headquartered outside the U.S.  So by definition if
an account is identified by Europe as a major account, we
classify them as a major account over here and put them into
this organization.


First we looked at the data for FY'91, then we actually
projected out sales in the same set of 718 accounts for
FY'93.  And this is the basis with which we are working to
set the quota for this organization.  It's really going to
be based on how much business we do.  By defining it as 800
accounts, how much business could we do with those 800
accounts in '91, where do we think we are going to finish in
'92, and then assigning some growth on top of that.  So that
is the analysis we are going through in Q4.


Let me talk a bit about sales rep assignments.  If we have
enough critical mass to dedicate a sales rep to an account
that is clearly the way to go.  Sales reps could also be
industry "bound" so if we can't dedicate a rep to one
account, we will want to dedicate him/her to multiple
accounts within a single industry.  If there is still
insufficient critical mass within one industry, we will
assign them by an industry group. But the industry group
lines are hard lines, just like the regions used to be. So,
within the Red organization, we will not have sales reps
that have some Telecom Industry accounts and some Financial
Industry accounts, for example.


Within the accounts or industries, or industry groups, we
want to maintain system and workstation focus, when and
where it makes sense.  We think that there is definite value
in many situations to have people focused on workstations or
have people focused on systems.  There are also situations
where we want a sales rep to carry both.  The accounts
organization will also have partner sales reps.  The concept
here is, that the account is the key driver.  We are looking
at the account as a market.  We want to move as much product
and service into that account and through that account as we
can from the sales team.  So, for example, AT&T is very much
a direct customer, but they are also an OEM, they are also a
VAR, they may be an ISV.  The team that handles AT&T as part
of the Red organization, will handle AT&T for all parts of
the business.  So even though AT&T is acting as partner,
those reps will be part of the Red organization.


TeleSales will also play an important role.  Although
Telesales Reps won't necessarily report directly to the Red
organization, they will be paid for by the Red organization
and dedicated to accounts within the Red organization, and
of course measured on their performance within those
accounts.  They'll actually be managed within the TeleSales
Center that reports into the Blue organization.  Another
position we are introducing this year is the Business
Development Rep.  This Rep will be available not only in the
Red organization, but also in the Blue and the Green
organizations.  The idea here is to take some of our senior,
high power, high level sales reps, if you will, and start to
move towards this idea of a dual career path.  We don't want
the only career option to be moving into a district sales
manager position - we want to be able to take these really
top notch sales reps that have the ability to sell
strategically, sell at high levels, work on large, complex,
long term opportunities, and have a position for them, and
scope that position accordingly.


GEOGRAPHY ("Blue") SALES ORGANIZATION


FY93 CSO SALES MODEL

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.PA
 TRENDS



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There is a need to Reduce the cost of selling to our
traditional horizontal customer.  Last year we assumed that
they would either become major accounts or that the channel
partners would take over, and that's how we would achieve
our financial objective. I think conceptually that over time
we may get to that point, but we really recognize that we're
nowhere near ready for that today.  The concept was we'll
just turn them over to the partners and they can do the job
much more cost effectively. So that was clearly a trend. The
thing that we really learned was a recognition that our
partners, the channels, really weren't ready for us to turn
that business over to them.  We were very naive to think
that we could just do that and they would be there, and that
was the market they wanted to focus on, etc.


The problem in this process is that we forgot about our
installed base that wasn't located in our major accounts.
In some cases they felt abandoned.  For those of you that
went to Interex, that was the theme of Manual's pitch.
We've just had a number of phone calls and letters that
aren't the kind of phone calls and letters that we like to
get.  We really want to go back and recognize the installed
base customers.  We can't abandon our installed base, they
represent a significant revenue opportunity, and also from a
customer satisfaction standpoint, we need to have a plan
here.


.PA
GEOGRAPHY/TERRITORY MANAGEMENT

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So the requirement is a strong territory program that takes
care of our customers and grows our business, maximizing the
use of indirect channels.  That is the overriding principle
behind the territory program.  In fact, what we are really
trying to do, similar to an account, is move as much
products and services into that territory as we can, through
all available channels.  It is the same concept as the Red
organization only with a defined geography.  You have this
defined piece of geography you want to move as much products
and services as you can, but the key difference here is that
we think that the Blue organization will be characterized,
over time, it might not get there in '93 -- 80% partner, 20%
non-partner.  Recognize here, a good part of the business is
going to continue to be direct and we need to look at that
as an opportunity and have the right programs to support
that.  But over time we do want to continue to move it to
the indirect channels.


We want to also measure this geography organization on
profitable sales as measured by Selling Cost Envelope and
market share, but instead of looking at market share from an
account standpoint we are looking at it from a piece of
geography standpoint.  We want to develop instead of account
plans, territory plans.  Again we are trying to create the
customer "pull" within that geography, and then even more so
than in the accounts, leverage from the partners.  Create
the demand, bring the partners in and maximize the leverage
of those partners.


.PA
TERRITORY SALES REP SPECIALIZATION

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Let's look at how Sales Reps will be specialized, or
assigned, within the territory sales organization.  Some
sales reps within a territory may be focused on industries.
You still can have industries within a geographic area, for
example, go back to my automotive example.  A lot of the
suppliers in the automotive industry are not big enough
companies to be part of the accounts organization, but
clearly could be a market that a territory sales rep could
focus on.  Other Sales Reps might be focused on
applications, system or workstation, or even account bound,
for large companies within the territory that don't fall
into the Red organization because they're not in one of the
strategic industries.  Sales reps could be installed base
focused sales reps, or new business focus sales reps.
Again, the idea here is for you as sales managers to
determine, given the demographics of that geography, how to
deploy and focus our sales reps to maximize the business and
geography.


We will clearly have a place for TeleSales within the
geography.  We want to have a close linkage between
TeleSales and what the territory reps are doing. TeleSales
reps may also be focused on installed base and/or new
business. It is up to the Sales Manager to determine what is
the right mix and how to deploy these resources.


Let me address the issue that some people have raised
regarding the movement of accounts from the territory (Blue)
organization to the account (Red) organization.  The
question is, will there be incentives for Sales Reps in the
territory teams to grow their account into the Red
organization?


Yes, we definitely want to have incentives.  We feel
strongly that if a sales rep develops an account to the
point where we want to move it into the Red organization,
that clearly we want to give that sales rep an opportunity
to move with that account.  This will ensure that the Sales
Rep feels rewarded for his/her efforts.  But we also want to
reward their sales management -- Sales DM, whatever, for
moving accounts up.  We haven't fully defined that program
yet, but work is underway.  We want to make people feel good
about moving the accounts up.

CHANNEL PARTNER ("GREEN") SALES ORGANIZATION


That is it for the Blue organization. Now I want to switch
gears again and focus in on the partner organization, and
then I'm going to tie it all together at the end and talk
about how they will interact.


TRENDS

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Back to trends -- there is a strong recognition that
partners are critical. Partners are required to assist us in
providing total solutions. Going back to this idea of
differentiating ourselves by adding value, partners can
really help us in doing that, and they are a critical
element of our strategy in doing that. Customers want
flexibility in choosing where to obtain low-end products. I
think we have all seen this -- it is the trend. It started
with PCs, and we are seeing it more and more.  Customers
expect low-end products to be available through dealer
channels. So, we could take one of two approaches:  we could
take the approach of ignoring these trends and hope it goes
away; or try to fight it and force all our business through
the direct channel, but we don't think that is the right
thing to do. Instead, we are going to embrace this trend and
try to make it a competitive advantage, but recognize that
it is complex to implement an all channel strategy.


Because the margins are typically lower for products moving
through indirect channels, we can afford less co-selling,
which means less sales resources.  We recognize however,
that for most CSO products, demand pull that is created by
HP territory and account Sales Reps is absolutely necessary
for the channel partners to succeed.

LaserJets have their own market pull. PCs, workstations, and
systems do not, so it is the direct sales force that creates
that pull. We want to make sure we have a financial model
that allows us to continue to have enough direct sales reps
out there to create that pull.


What we want in the Green organization is a strong partners
program that is complimentary to our direct channel, (both
the Blue and the Red) which will result in a true all
channel strategy.  What an all channel strategy means, from
a sales rep standpoint, is that a sales rep from either the
Blue or the Red team gets 100% credit, whether it comes
through the reps, a VAR, or a systems integrator.  This is
the essence of a "channel neutral" sales strategy.


PARTNER MANAGAEMENT

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Although the CSO/Americas channel strategy continues to
evolve in a rapidly changing marketplace, the main focus is
to identify, recruit and develop all types of partners to
maximize HP sales in the accounts (the Red organization),
and the geographies (the Blue organization).  That is it, in
a nut shell.  We want the business to be profitable for HP
and for the partner.  It is important that the partner is
profitable, ultimately, because we need them to be
profitable so that they will be around in the long-term.
Instead of account programs or geography programs, we are
going to focus on partnership programs, partner
relationships.  Instead of developing an account sales plan,
or a territory sales plan, we will be developing partner
sales plans for these people.  We also want to be very
active in helping channel partners develop their business
plans to grow their business.  And then ultimately, we want
to maximize our number of partner solutions. All recruiting
will be done within the Green organization, but obviously
there has to be a tight linkage between the Green and the
Red organization. And that is really a lot of what industry
marketing will do. Industry marketing, which we talked about
earlier, will help determine which partners we need, and
they will work with the Green organization to recruit those
partners. They will all have money to give to the Green
organization to recruit the right partners.


Occasionally, an end-user customer called on by the Red
sales organization also acts as a VAR or OEM.  In these
cases, the Red team will have responsibility for managing
the business flowing into the "indirect" side of the
account.  We will have some exceptions to that, but this is
the general rule, which supports the notion that the
"account relationship" between HP and a direct account will
take precedence over the indirect business in the same
account.


PARTNER TYPES

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Here are some of the different kinds of partners that we've
identified as part of the Green organization.  We have
influencers which are consultants, agents. Solution
providers include ISVs, and we are really trying to
characterize ISVs this year more then we have in the past in
terms of are they tools providers or applications providers?
We think we need to handle each of these cases a little bit
differently. System integrators may also be a solution
provider when they are not selling hardware. But they also
can be a reseller if they are selling hardware. Other kinds
of resellers include VARs, OEMs, value-added dealers, and
CWRs.  Two-tier distribution occurs when HP sells to a
distributor who, in turn, sells to end-users through value-
added dealers, CWRs, or DARs/small VARs  Tuning our
effectiveness in these so called "2-tier" channels is
becoming increasingly important as price per unit on systems
continues to decline.


.PA
PARTNER SALES REP SPECIALIZATION

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Partner Sales Reps will be specialized as follows.  They
will either be "partner bound" or "partner type bound", like
headquarter remote and system or workstation, if it makes
sense. The partner type bound could have a mix, whatever
makes the most sense. We will have separate recruiter sales
reps, and we think TeleSales also has a place in the channel
partners organization.

I introduced the Business Development Sales Rep in the Red
organization discussion, but I want to make the point that
that position could also be available in the Blue or the
Green organization.  In cases where we have a large
strategic partner that we have needed to recruit as a long
term effort, that would be a great place to put a good, high
power, Business Development Sales Rep.


The beauty of the partner (Green) and geography (Blue) sales
organizations is that they are tied together under one roof.
This organization structure, which can be thought of as the
"Blue/Green" organization, together with a channel neutral
compensation strategy, will greatly increase the
effectiveness of cooperation in channel/geography sales
situations.

The geography/partners organization will be split up into
six Areas.  Each will correspond to the three new NAFO
regions in the U.S., so we will have two Areas in the West,
two Areas in mid-America, and two Areas in the East.

To develop the right partners  to maximize channel sales;
and then maximize overall HP sales within the geography.
That is what this organization, this person gets measured
on. To see how it all fits, we will have territory
districts, partner districts, and TeleSales networks to
support that.

That covers the three main pieces of the organization - the
Red, the Blue, and the Green.  This slide ties it all
together.


ACCOUNT & CHANNEL STRATEGY

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This is the triangle slide that most of you have seen.  The
Red organization (shown by the "Account Mgmt" box) is
basically selling to the 800 accounts (shown in the top
triangle), typically selling direct but also with ISVs. The
Blue shown as "Territory Management is selling some direct,
but mostly through partnerships with VARs and system
integrators as resellers.  Also recognize that these VARs
and system integrators can also be resellers up the Red
organization's sales path. In these situations, we would
like to see these VARs and systems integrators act as ISVs
in the Red organization.


Ideally, we'd like to see ISVs up in the Red, VARs,
equipment resellers down in the Blue, but also recognizing
that what we want them to do and what they want to do isn't
always the same, so we want to make sure that regardless of
what they do in the Red, our reps are going to get
compensated, and feel good about it.


The partner (Green) organization sells to the VARs and
system integrators, and they also take care of the ISVs.
Two tiered sales occur when we sell to distributors who, in
turn, sell to small VARs or small value-added dealers
(VADs), for example the CWRs or OEMs.  As the second and
third "layered" triangles illustrate, VADs and OEMs see the
entire customer base as fair game.  Recognizing this fact,
and the fact that each sales distribution "path" has a
different cost structure to HP, our all channels sales
strategy has been designed to compensate all parties as
fairly as possible.

On the left side of the slide you will see a box marked
"Channel Mgmt".  This represents the management team at the
Cupertino Headquarters who has the responsibility of
ensuring consistency and equity across the various channel
programs.

And finally, on the far left of the slide is the CSO
marketing organization, this is aligned to the sales teams
to provide focused programs that will maximize the sales
efforts of each team.

This concludes the overview of the organization structure
for FY93 and the 3-Year Success Model philosophy that drove
it.


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