HP has roughly doubled the number of VARs that can bypass distribution in favour of buying its Imaging and Printing Group (IPG) products direct from the vendor. That group now includes about 20 of its largest volume print partners.
These dealers are offered larger rebates to buy direct from HP than to source product through distribution.
HP South Pacific vice-president and general manager of IPG, Rebekah O'Flaherty, said the change had been made to align the vendor's IPG and personal systems group (PSG) channels.
"At the time of the merger with Compaq, both companies had a select number of resellers with direct relationships," she said. "PSG rationalised its channel and came out with a list of direct corporate resellers.
"IPG was not aligned before now. The strategy is to drive up attach conversions for the channel."
Brisbane-based Data#3 and Melbourne-based Southern Cross Computer Systems are two of the VARs that have been given the option of buying IPG products direct from HP in recent weeks. Both could already buy other HP products direct.
Data#3 general manager, Laurence Baynham, said the company would decide where to buy from on a case-by-case basis. "It's a question of the service levels we can get. If stock is to hand through the distribution channel then it is supplied quicker so we will source product from there," he said. "If we have planned ahead and can afford to wait for stock then we will buy from HP."
Southern Cross CEO, Mark Kalmus, said HP had not given a reason for the change but suggested it was probably designed to put all tier one partners on an equal footing.
"It won't mean a great deal to us because we tend to lead with server and SAN offerings," he said. "From a marketing perspective we can tell customers we have direct access to all HP products but if they don't have stock we will buy through distribution anyway."
Kalmus estimated it was about 3-5 per cent cheaper to buy direct from HP. However, a distributor would often be cheaper for certain product lines.
Leading Solutions' managing director, Frank Colli, said his company had been able to buy IPG products direct for a long time. While there were discounts for buying direct, he claimed it was still generally cheaper to buy through distribution.
"Buying direct is not about cheaper pricing," Colli said. "It's about having a direct relationship with the account manager."
Increasing the number of VARs that can buy direct from HP is bad news for Ingram Micro, which supplies many of these resellers.
Synnex managing director, Frank Sheu, said the main focus of his IPG business was SMB and that more large VARs buying direct from HP was not a concern for him. Ingram's national sales manager, John Walters, would not disclose the percentage of Ingram's IPG sales accrued through these resellers but said the distributor would work hard to retain as much of it as possible.
While he was disappointed by the decision, he remained philosophical.
"A vendor has the right to determine how it wants to go to market and what channels it uses," Walters said. "Our role is to make ourselves as easy to do business with as possible in acting as a conduit between vendors and resellers."
Data#3's Baynham said vendors would always alter channel arrangements to suit their current strategies. It would be more of an issue if resellers and distributors were both being ignored.
In July 2004, HP announced plans to take 150 of its top IPG customers direct by the end of 2005 under a Corporate Account Program (CAP). One aim was to encourage customers to stop purchasing hardware and consumables in favour of a cost per page services model.
HP had been increasing its percentage of direct business in the past two or three years, Baynham said, largely in response to the success of Dell's model. "Dell's success is a worry for the channel but HP's reaction to that success is a bigger concern," he said. "Where HP has used the channel as a differentiator we have been highly successful. "The channel's strength is in service levels and relationships. Some people still appreciate face to face selling."