HP goes direct to top print customers
- 06 July, 2004 17:00
HP will sell direct to its major imaging and printing customers in an attempt to maximise its share of the converging copier and printer markets.
The Corporate Account Program (CAP) will see HP targeting customers that spend more than $100,000 per year on printing and imaging. It plans to have 150 organisations signed up by the end of 2005, which could account for up to 10 per cent of its imaging and printing group (IPG) revenues.
The program will be capped at 200 customers, those signed up will have a 12-month membership and reviews will be conducted every six months.
Distribution partners - Synnex, Ingram Micro and Tech Pacific - and the largest IPG resellers were told of the program in face-to-face meetings. The rest of its channel was notified by letter.
"The program will require us to sit down with channel partners to talk about appropriate accounts," general manager of HP IPG South Pacific, Rebekah O'Flaherty, said. "They might shed some light on the subject that we are not aware of.
"Some vendors in the past have said they were taking part of their business direct and then cherry-picked. We are being very predictable and transparent, which is very important.
"The key message for the channel is that this represents a small piece of business and we need them to continue to address the lion's share of the market."
O'Flaherty predicted the CAP program would make up 3.4 per cent of IPG revenues for the current financial year. She also said half of the CAP accounts would be business won from competing copier vendors.
"HP needs to be more aggressive in that space because Xerox and Canon are doing a pretty good job of it," Ingram Micro managing director, Steve Rust, said.
"My reading is that HP will have some success and might be a role model for resellers to do it themselves. They're investing more to help resellers sell this type of solutions."
Overlap between the copier and printer markets had been increasing during the past couple of years, O'Flaherty said. HP had tried to address this opportunity through the channel but she described results as mediocre.
"We have had some results, and I don't want to diminish those, but it's been difficult to get mindshare among resellers when IPG is only a small portion of their overall revenue," O'Flaherty said.
As a result, HP had now decided to identify those customers willing to ditch buying hardware and consumables as and when necessary for a new cost-per-page services model. She called this a transition from chapter one to chapter two business.
"The market is under threat globally because chapter one business is shrinking," she said. "Chapter one is HP's heartland and the channel does a fantastic job in that space. But we want resellers to orient themselves towards this new [chapter two] opportunity."
According to Gartner figures, 70 per cent of all office output equipment will be procured through leasing arrangements by 2005 instead of purchasing equipment.
HP IPG enterprise sales manager South Pacific, Shane Lucas, said the vendor had worked hard to educate resellers about this convergence shift during the past 18 months.
It had also been teaching partners about annuity best practices, he said.
"The growing trend towards multifunction printers means customers can consolidate their fleet but doing so requires more consultative services," Lucas said. "They need to understand what fleet they have and the right way of reducing it.
"Most customers could do with some consolidation but it's a fine art because over-consolidation can affect productivity."
While HP would tout its direct services model to top print customers, O'Flaherty said there would be plenty of cost-per-page business left for channel partners to capture.
"There will still be a lot of chapter one business available but mid-size companies are increasingly moving over to cost-per-page and we need a channel to sell it," she said.
"So far, we have been working with channel partners to get them over the line on chapter two deals. From a commercial point of view, that is duplication. The channel needs to get its head around this market and address it."
While IPG was going direct with hardware and services, O'Flaherty was quick to point out that consumables suhc as cartridges and paper would continue to be provided exclusively through its supplies channel.