Editorial: The thin end of the wedge?

Editorial: The thin end of the wedge?

It has been said before in this column, but it is worth saying again - clear lines of communication between a vendor and its resellers are essential if a channel is to act effectively. As long as a manufacturer clearly flags any areas where it intends to sell direct to end-users, resellers can make an informed decision on whether or not they can turn a dollar from what is left.

Last year, HP held face-to-face meetings with its distributors and some leading resellers to let them know it would work directly with up to 200 of its largest print customers under a newly created Corporate Account Program (the name was later changed to Enterprise Account Program). Smaller partners were notified of the decision in a letter. The transparency HP spoke of at the time will have been welcomed by the channel, even if the decision itself was about as popular as a mink coat at an animal welfare rally.

But the recent addition of the Victorian Department of Education and Training (DET) to its EAP customer base has created a rather large headache for Garden State dealers that had specialised in selling to schools. While they can still secure discount pricing for private institutions, try naming a business that wouldn't be hurt by having its potential customer base cut in half. It's pretty tough, right?

When ARN contacted HP to discuss what implications the decision would have for its resellers, the company issued a brief statement and refused to engage any further. It said resellers had been notified through its partner portal and pointed out that its commitment to transparency did not apply to the press. Fair enough.

However, these must be nervous times for anybody making a living out of reselling HP hardware to public schools in New South Wales, Queensland or anywhere else in Australia for that matter. Government departments stereotypically have about as many free thinkers as a lemming colony, and it is unlikely to take too long before other educational bodies are asking what HP can do for them. That is if HP isn't already beating their doors down.

And if that is the bad news for HP partners, the really bad news is that recent announcements point towards the vendor strengthening its direct presence across its hardware range.

Globally, the company recently merged its ailing PC division with its Imaging and Printing division and parted company with its CEO, citing a failure to successfully incorporate the Compaq business it acquired in 2002. It is no secret that HP has copped something of a PC beating from Dell in recent times - the referee might have already stopped the contest if it was boxing match - and the easiest way of trying to improve its flagging profits would be to cut out the middle man wherever possible. If you can't beat them, join them.

Locally, the HP business model was thrown a curve ball when Ingram Micro announced it was acquiring its biggest competitor, Tech Pacific. While all affected vendors declared they would keep an eye on the merger's progress, HP more than any other must have been alarmed. After all, its PC business is reliant on large volumes and it has suddenly found itself in a position where it is too dependent on one distributor if it is too hit its numbers. Given that there isn't a distributor big enough to play off against the new look Ingram, expect to see HP further strengthen its direct sales force.

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