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Editorial: Dead men walking

Editorial: Dead men walking

The waiting is almost over. It is now just a matter of weeks until the distributors and resellers in the post-merger HP's channel know whether they have made the grade or not.

Have no doubts about it, there are going to be some very disappointed channel companies as a result of this rationalisation, which has taken three months to finalise. Last week, HP would neither confirm nor deny information from ARN sources, which indicated that as many as 20 of the 55 resellers on the books who are currently dealing directly with HP would be "realigned".

While these companies will not be banned from selling HP as such, they will be forced to purchase through distributors and they will see significant changes to their current rebates as well as other terms and conditions.

It is a little less clear as to how many of the distributors will be shunted, but industry estimates are that two or three of the current eight players will have to go. Just which ones won't survive is the subject of enormous debate but it has been made clear to all parties that the criteria will not be based purely on revenues.

That is also the case with the direct-dealing resellers, which makes it a little hard to understand why there is currently so much emphasis in the channel on price-cutting of HP product. If some of these distributors and resellers put as much effort into developing and proving their value proposition to the vendor as they do to winning deals on price, they would be closer to securing a place in the HP sun.

Interestingly, in a conversation with HP's personal systems group general manager, Tony Bill, last week, he indicated to me that there is an expectation of more consolidation within the HP channel that is beyond the vendor's control.

He said that the recent deal that saw ASX-listed company Commander buy Centari Systems - one of the largest HP dealers in the country - is unlikely to be the last. According to Bill, HP has been consulted on a couple of potential mergers and acquisitions, whose parties were seeking input as to how that might affect their standing in the revised HP.

He obviously couldn't say too much because of commercial-in-confidence responsibilities, but he did say: "As there has been consolidation in the vendor community, so too has there been in the channel. There is talk in the channel of a lot more consolidation, so we need to look at how that plays out."

This, he said, should occur at both the distribution and reseller tiers of the supply chain.

So when the final decision is handed down in the HP channel restructure, what will become of the broken-hearted?

Reseller partners that do get "realigned" will get a "pack", which explains how their rebate program has been adjusted and where their touch points with the vendor will be in the future, according to Bill. He said that HP will be driving a final-tier rebate program and will still have some staff focused on these resellers, which by then will be dealing with distributors.

"We will not be driving an axe through the relationship," he said. "We will still have final-tier salespeople within our organisation. We will still work with those who are realigned but their procurement will be through distribution."

It is difficult to surmise how distributors that miss the boat will be impacted, but in most cases it will be pretty devastating. The good news for them is that their fate will soon be known.


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