HP's channel restructure 'on track'

HP's channel restructure 'on track'

While a price war rages amongst post-merger HP partners in a scramble for market share and revenues, the vendor has warned that this is not the only criterion by which its channel realignment will be judged.

Tony Bill, HP's general manager, personal systems group (PSG), said he is well aware of the continuing competitive pricing battles that are being fought to move HP desktops and notebooks. He said that this has been good for the vendor's market share but reiterated that partners will need to do more than just move boxes to stay in its anointed channel line-up.

"I gave them the criteria," Bill said. "It is not just a revenue play. It is also geographic coverage, product specialisation and the ability to move us into new markets as well as future growth potential.

"Revenue is a key driver because it is cost-efficient for us to do business with a partner that is selling large volumes. What we have advised the partners is that we will look at revenues over an extended period -- probably over a 24-month period -- and we will look at trends on that revenue rather than just looking at the last three months."

Bill said last week that he is "on track" to finalise the channel restructure by previously stated deadlines. The process has been a "very difficult thing to do", he added.

"We are probably 90 per cent through the process," Bill said. "Advice will be given to both the continuation partners and the realigned partners by the end of this month. We will use October to work those realignments so that by November 1 -- the start of the HP financial year -- we will be executing the new HP channel.

"We have got loyal partners that have been with Compaq or HP in some cases for a long time but, for whatever reason, some of them are not going to make it."

Bill said that in terms of units shipped in Australia the combined total of the company's sales post-merger is more than the sum of what Compaq and HP moved as individuals. He would not comment on whether revenues enjoyed the same good fortune.

"One plus one has equalled more than two in market share and I am very pleased with the way revenues are going," he said.

HP's most recent global report to the stock market showed it to be losing 2.5 per cent in the PSG division but Bill insists this is not the case in Australia. "I can't give you the exact figures, but we are doing better than the rest of the world."

Bill was also keen to point out that the global goal to move half of PSG revenues to a direct model is not what the plans are for Australia. While conceding that there are definite supply chain cost efficiencies in more direct dealing, he would not be drawn on goals, but he did say it would be "less than 50 per cent".

Within the "less than 50 per cent" of HP's sales that will be direct, Bill said there are three categories of direct sales. These are its pure direct sales into large accounts, an "agent direct" strategy, and a "partner direct" strategy.

Agent direct is where "a reseller can play multiple roles in the deal from simple referral right through to logistics management for which an agent fee is paid", he said. On the other hand, partner direct is where "the reseller engages the customer, makes the sale, manages the credit and we build to order and ship the product directly to the customer".

Bill also declared that the staff rationalisation within his group was completed "a few weeks back" and that it was within the originally stated range of cuts of 10 to 15 per cent.

"We have made some hard decisions where we had some duplication such as in our call centres and sales force centres," he said. "We made the decision to locate the sales force centre in Sydney instead of Melbourne and there was some attrition as a result of that."

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