Hewlett-Packard's personal systems group (PSG) will retain only "around half" of its 55 direct partners and will ask the other half to source product from distributors.
Due to "business competitive reasons", the vendor refused to divulge any information about the realignment of partnerships, except to say that it would personally inform partners in the days leading up to October 14. This is when HP is expected to publicly announce its channel programs and rebate structures for its PSG and imaging and printing group (IPG).
On the whole, HP's tier-one resellers are pleased that the new entity is adopting Compaq's flexible structure. Most are of the opinion they will maintain their direct relationship status, citing the large amount of HP business they push.
"To my knowledge, notifications have already been issued to unsuccessful resellers, so no news is good news," said Colin Pederson of Tasmanian reseller Computerland.
Jon Johnston, managing director of Commander (formerly Centari Systems), believes the eradication of some very small dealers holding direct relationships is a logical decision. Several of his peers agree.
"We look to HP to help protect the big investments we've made - accreditations, training and even linking our systems electronically - against the tier-two or tier-three resellers who haven't made that investment," said Volante's Hugh Bickerstaff.
For other resellers that sit on the threshold of HP's requirements, there is a nervous wait ahead in the coming weeks. "Compaq had a much larger group of direct resellers than HP so this whole rationalisation was expected," said Peter Gartlan, a director of Comstra. "But there are big advantages to having a direct relationship so we are hoping not to be cut off the list."
Gartlan said that after the vendor has "realigned" certain partners, they will need to carefully look after the partners who receive the bad news. "The risk is that HP could lose market share," he said. "There are plenty of vendors out there like Acer that are willing to pick up on any disaffected resellers."
Concerns remain among large HP partners as to what exactly the new direct model will mean. Miles Flanagan, sales manager for CES Computers in the ACT, said it "requires clarity" as does the fulfilment arrangement in direct accounts.
"HP has great products but they haven't engaged their partners very successfully," said Joe Acruri, NSW sales manager for BCA IT. "If the new entity can adopt Compaq's mentality and structure, which they appear to be doing, I think they'll do very well."
Pederson voiced the optimism of many in saying that he hoped he would "attract some vendor loyalty when it comes to big deals", now that his loyalty to the HP brand has been established.
The consolidation in the IT industry has left little for resellers to choose from. "Five years ago we had a selection of tier-one vendors, but now there is only HP and IBM left, and it is difficult to see anyone else stepping up to the mark," said Pederson.
HP partner definitions
- Business Partners (direct and indirect partners): Business Partner relationships are determined by the training and channel partner product specialisation, the level of business done with HP, the partner's geographic coverage, and the value-add they provide to end users in developing and growing HP business.
- Managed Business Partners: Enjoy the same benefits as Business Partners with the additional service of a designated HP account manager.
- Agents (part of Agency Program): Partners who receive a commission for services but do not have the accreditation to resell product.
- Registered Resellers: All of HP's reseller base (be they Business Partner or other) are classified as Registered Resellers.
Ten million dollar men
It appears that HP has been true to its word -- volume will not be the only consideration in the selection of tier-one partners. Here's what the channel said about the speculative $10 million yearly volume requirement.
Volante: "It's a pretty big number. We could be their only dealer if they bring that on."
BCA IT: Has individual accounts that do more than $10 million of HP gear in a year.
Fujitsu: Would make the $10 million hurdle.
CES Computers: Getting close to $10m. It's incumbency in defence is of significant value.
NetOptions: Substantially above $10m.
Harvey Norman: Getting closer to $100 million. To date HP is the largest supplier to the PC division.
Computerland: Hitting the $7 million-a-year target.
Commander, CSC, Data#3: At least five or six times that figure.