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HP ServiceOne gains Flexible Capacity option

HP's Flexible Capacity, now available through ServiceOne, enables customers to contract for data center infrastructure installed on-premises and paid for based on monthly capacity usage.

The way businesses consume IT is changing and so is Hewlett-Packard Co.'s three-year-old ServiceOne program. Today the vendor upped the ante and rolled out the HP ServiceOne 2.0 program, a key piece of which puts HP ServiceOne partners side by side with HP field sales staff to offer a unique custom capacity as a service offering.

With ServiceOne 2.0, HP has expanded the portfolio to enable Platinum partners with what HP calls an "on-ramp to the new style of IT." HP has also expanded the services that partners can deliver and simplified the path to ServiceOne partner certification.

Today, 2,600 HP ServiceOne partners participate in HP's global services program. These partners reap benefits by selling anything from HP consulting services; installation and startup; HP Foundation Care Services; HP Proactive Care Services; lifecycle delivery; and HP More for More, a special compensation structure for partners who participate.

With ServiceOne 2.0, HP has created a new revenue opportunity for partners, the most exciting of which surrounds new IT consumption models, said David Twohy, vice president of global channel services at HP.

"One of the things we're really excited to announce from a channel perspective is that our [Platinum] partners can now sell a new offering called Flexible Capacity," he said. Gold-level partners will be eligible to sell Flexible Capacity in the second half of 2015. HP has been selling Flexible Capacity directly for a little more than a year, mostly in Europe, the company said.

Twohy refers to the new offering as on-premises infrastructure with cloud economics.

"Partners can provision this with their customers and we can put servers, storage, networking or converged systems in the customer's data center and customers pay for only what they consume on a monthly basis," he explained.

The installation includes additional capacity beyond initial demand (referred to as a buffer), to accommodate a variable workload, and the provider underpins the entire arrangement with HP Datacenter Care, the vendor's highest-level service offering, to ensure that the solution is always up and available. Use of the storage and networking devices and servers, etc., are tracked monthly by a metering system.

What we look for are workloads that have a high degree of variability on a month-to-month basis, time of day, time of month or time of quarter spikes but are growing.
David Twohyvice president of global channel services, HP

With Flexible Capacity, the customer doesn't own any hardware. And, according to HP, Flexible Capacity will likely to save customers money since they tend to overbuy infrastructure because they're usually buying for peak loads or spikes in usage.

"What the customer signs up for is a services contract that includes the ability to flex up or down based on actual consumption," Twohy said. Service contracts typically run three or four years.

The role of the ServiceOne partner is to identify, qualify, register and sell the Flexible Capacity offering alongside HP and get customers to move from a capex model to an opex model.

"When we close the deal, we pay the partner for all of the hardware and all of the services upfront, so it's a significant revenue opportunity in a new way," Twohy said.

All the hardware included in Flexible Capacity flows through the partner, and they receive all of the upfront margin dollars and back-end benefits expected from a PartnerOne ServiceOne perspective. Partners are also paid for all of the services that underpin a customer's service contract, such as installation, setup and Datacenter Care.

The recurring fee paid by the customer is based on a contract between HP and the customer.

The new service offering changes the discussion that partners currently have with their customers from a traditional capacity and price dialogue to one oriented toward solving business problems and flipping capex to opex.

Although the official announcement about HP's Flexible Capacity offering was made today, the vendor kicked off the program with some partners last week, said Twohy, who added that HP ran two Flexible Capacity launches, one in Chicago and another in San Diego.

With 100 partners in attendance, representing 44 Platinum ServiceOne partner companies, HP offered training on how to identify and qualify Flexible opportunities. HP also provided partners with tool sets, sales collateral and co-branded marketing materials.

"We uncovered dozens of opportunities in just those two days," he said.

What type of customer is a good fit for Flexible Capacity?

According to Twohy, good candidates are financial companies that have compliance or latency issues and need to have the infrastructure on site; healthcare companies that have HIPAA compliance requirements; state and local government agencies that may have a limited capital budget but need the latest and greatest technology; R&D firms; and biotech firms.

Once the vendor and partner identify the customer, they review the type of workload that would make sense for a Flexible Capacity solution. "What we look for are workloads that have a high degree of variability on a month-to-month basis, time of day, time of month or time of quarter spikes but are growing. Growth is key," Twohy said.

Twohy noted that when the metering software indicates that a customer is consistently using the buffer-zone capacity, a meeting is arranged with the customer to identify changes in the business environment to provision incremental capacity, and a change order is put in place.

At this time, the partner gets compensated upfront for the net-new hardware and services.

Besides the Flexible Capacity rollout, HP also announced that qualified ServiceOne partners can co-sell and deliver HP's Datacenter Care, which makes the entire HP services portfolio available to those partners.

HP is also rolling out new tools with automation that enables partners to attach services when selling hardware and renewing services. In a pilot test of the new tools, partners reported seeing 10x improvement in quote turnaround times and a 50% reduction in sales costs.

One of the tools, called Services 360Pro, is a self-service tool designed to help partners with quoting and opportunity management.

HP has expanded delivery for Proactive Care Services, its fastest-growing services product. Up until today, partners were only able to sell but not deliver Proactive Care Services. About three-quarters of Proactive Care Services revenue goes through channel partners.

Finally, HP has simplified and streamlined the entire training and certification process for HP ServiceOne partner program, the company said. For example, it has removed some prerequisites.

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