HP Offers Partners Compromise To Ease Growth Rebate Flap

Hewlett-Packard has opted for the middle ground in its growth rebate controversy with solution providers and will now compensate partners for all enterprise product sales regardless of how much they grow their HP business.

"It's clearly a middle ground between what many of us wanted, which was just to be paid some percentage of sales, and HP folks that were interested in investing in the partners that were growing," said Larry Holzenthaler, executive vice president sales and marketing of Total Tec Systems, an HP enterprise solution provider in Edison, N.J.

"I have to hand it to HP; they are finally listening," added Felise Katz, CEO of PKA Technologies, an HP enterprise solution provider in Suffern, N.Y. "This is a result of positive collaboration and working with us to get to a model that is predictable and will help us grow our businesses."

The changes to HP's Growth Accelerator rebates kick in May 1, and are part of a series of enhancements to the vendor's PartnerOne channel program. Growth Accelerators were added to the PartnerOne program in March 2007 and were designed to pay partners added rebates for hitting and exceeding quarterly growth targets in specific product categories.

But many HP enterprise partners said that growth goals for enterprise products, notably storage, were unrealistically aggressive and extremely difficult to hit. Additionally, growth goals were based on year earlier sales numbers, meaning if a partner had a blow out year or quarter, he would have a difficult time besting those numbers in the current period and thus receive no Growth Accelerator rebates.

"What we've done is make the growth goals very predictable and consistent," said Tom LaRocca, HP's vice president, partner development and programs. "The way we do it today, once you hit 70 percent of your goal, you start getting rebates. [May 1] we are going to start paying from dollar one up to the goals and once you go over the goals, the scale dramatically increases."

Without giving specific numbers, LaRocca said that Growth Accelerator rebates more than triple once a partner surpasses his sales goal for a specific product category.

"HP is being responsive to our request to get some funds even though we might not sell as much as we sold the last year or meet the growth accelerators," Holzenthaler said. "Clearly, this is a better program than previous years and certainly going into a recession its unclear if you're going to be able to grow your business. Now you feel more comfortable that you are going to have some money coming in."

Meanwhile, several HP enterprise partners who asked not to be identified said the vendor is still having problems with sales data discrepancies. HP solution providers have complained for months that their HP sales figures rarely match those reported back to them by the vendor. Because most often the HP data understates what partners believe represents their actual sales figures, solution providers said they spend an inordinate amount of time trying to reconcile the differences.

"At APC [Americas Partner Conference in February], when we put up the e-mail address that said to ask questions about HP programs go to HP.com and we gave them an 800 number around reporting issues or that they weren't paid properly, we've seen a dramatic reduction in partners with issues over their payment structures," LaRocca said. "We're seeing a little bit more integrity in our data. It gets better every month."

Katz said that HP still has work to do to fix the sales data reporting problem, but she is encouraged by the steps it has taken. "The first sign of recovery is recognition that there is a problem," she said. "It's a work in progress, but the willingness to improve is half the battle."

LaRocca said too that HP is changing the compensation structure for its Elite offerings. Previously, HP paid Elite solution providers more for selling into non-named enterprise accounts than it did named accounts managed by HP's TSG direct sales force. Beginning May 1, HP will pay the lower named account rate to all qualifying Elite solution provider sales, he said.

LaRocca said the revised plan makes Elite payments more consistent. He noted that the lower compensation rate would save HP money, but he said a new incentive program would give that money back to solution providers that make a greater investment in their HP business.

He said HP Gold or Platinum solution providers selling TSG products without any Elite designations would receive a standard base compensation, which he declined to reveal. A Gold or Platinum partner with one Elite Certification could receive 50 percent more than the standard compensation. And Gold or Platinum solution providers with 3 Elite designations including BladeSystem, Enterprise Storage and either HP Services or Business Critical Systems could receive twice the standard Elite compensation.

"As you scale up your investment with us, we'll scale up our investment with you," LaRocca said.

Additionally, HP is adding two new Imaging and Printing Group Elite designations, including Office Printing Elite, which replaces the current SVIP Elite, and Office Printing Solutions Elite.

Office Printing Elite focuses on MFP products and services while Office Printing Solutions Elite rewards solution providers driving more complex contract and cost-per-page sales and document management solutions.