Editorial: A bit much

Editorial: A bit much

Weeks of suspense, much of a muchness and not much to say. That, in a nutshell, is what HP's eagerly awaited channel realignment announcement is about.

The so-called channel restructure has so far amounted to little more than introducing the (not-so-new) distribution line-up, and bucket-loads of extreme caution in revealing what the nuts and bolts of the new relationship between direct partners and HP's personal systems (PSG) and imaging and printing (IPG) groups will be.

One thing that everyone agrees on is that no news is good news. Rebekah O'Flaherty, HP's general manager for IPG, is adamant that when details of the new terms and conditions are revealed in a week's time, the redemption for HP's current secrecy will come in the form of a ‘good news' package for the channel. Except, everyone wants to know what the good news actually is.

Amidst much let's-not-call-a-spade-a-spade rhetoric, few things have become clear. Though carefully worded, the expected realignment of some 50 per cent of PSG's direct partners to new procurement arrangements and the shift towards more direct involvement with enterprise customers comes in those areas where lack of focus on HP product has been identified. Put simply, as both Alstom IT (the distributor of HP's OpenView) and Brightpoint (a solid Toshiba mover) have found out, playing too well for the other team results in separation.

O'Flaherty may be right in saying that the sentimental times of vendor-reseller hand-holding are over and realigning partners is all about achieving greater distribution efficiency. Yet the message to resellers couldn't be more ambivalent. In HP's view, their value lies in pursuing the number one goal of O'Flaherty and PSG general manager Tony Bill of achieving better market coverage - and focusing on HP. But the real value of resellers lies in their ability to select the best solution for the customer. Challenging the core of that value is far more serious than potential annoyances with distributor-managed rebates and credit programs.

But neither PSG nor IPG have much choice. Since the HP-Compaq merger, 15 per cent of the combined entity's overall global revenues has come from cartridges. In Australia, more than 50 per cent of IPG's revenue is generated the same way - and even here, threats arrive in the form of companies like Peach, a third-party consumables manufacturer capable of undercutting the vendor by as much as 50 per cent on its most lucrative product (see ARN, October 2, page 1).

It's not that HP is not interested in selling more hardware. It's just that hardware's not selling and, like all other printer companies relying on cartridge sales to see them through tough times, alleviating hardware distributor price wars at the expense of their consumables-dependent business model is not the highest priority. All they're interested in is creating a bigger market for printer cartridges, which fill their coffers. Thus the focus on geographies.

Looking at the bigger picture, however, doesn't help you, the reseller, if your market affords only limited opportunity for ever-rising revenue objectives. And neither does it help your distributor who, apart from dealing with ever-declining margins, now has to take on the additional responsibility of reseller rebate and credit management.

And the winner is . . . HP, of course. Not that the vendor will reveal how much it expects to save/gain from the new arrangements. Only time will tell.

What's your view?

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