Solution Providers Concerned About Future HP-Compaq Channel

Hewlett-Packard Compaq Computer

HP and Compaq planners are contemplating two channel hierarchies: one for the high-end value channel, and another for the volume PC and printer channels, sources said. Under that scenario, the merged company could end up with two channel chiefs--and no executive with overall channel responsibility.

"A couple years ago at HP, [there was a volume channel and a value channel. And there was very little crossover and understanding. Then they merged the two. I don't want them to take a bold step forward in merging with Compaq and then take several steps backward in the way they implement [the channel strategy," said John Sheaffer, president and CEO of Sysix Technologies, a Westmont, Ill.-based solution provider.

'Value and volume are converging; Unix and NT servers are converging. How do you say what is value and what is volume?" said one channel executive who asked not to be identified.

An HP spokeswoman said no details on the merged channel will be disclosed until the proxy vote is formally certified in about two weeks.

"What if one side wants to go to [HP's Hard Deck and the other doesn't, or one side wants to do closed distribution and the other open distribution?" said another channel executive who wished to remain anonymous. "HP had a Unix channel and an NT channel a couple of years ago, and it was ugly."

HP Chairman and CEO Carly Fiorina said in a CRN interview last month that Hard Deck would be the prevailing channel strategy in the new company. Still, she said, HP would pursue a direct distribution strategy for PCs as a way to speed inventory turns.

Regardless of the merger outcome, solution providers must brace themselves for more direct competition, said Mike Mogavero, executive vice president at Data Systems Worldwide, a Woodland Hills, Calif.-based solution and managed services provider.

"The message remains the same: Don't expect that this [merger is going to improve your relationship with these companies or that it is going to hurt it," Mogavero said. "We have all got to keep building our practices the best way you can. The writing is on the wall: Wall Street is pressuring these companies to gain more efficiencies and telling them that they need to increase their share of direct business, whether it is PCs or services."

Solution providers must reduce their heavy reliance on vendors such as HP or Compaq, he added. "The world is changing. We all have to accept that," he said. "No matter what happens, brace yourself for more competition."

Despite the uncertainties surrounding the merger battle, many solution providers welcomed the deal. "It's probably one of the best things I've seen come down," said Mylon Staton, president and CEO of Datalink Interactive, an HP solution provider.

"In the past, we were both a Compaq reseller and an HP reseller," Staton said. "As far as equipment goes, they were pretty much along the same lines. Compaq was a little bit harder to deal with on the support side. HP is easier to deal with. We actually dropped Compaq. Now we can have access to the complete product lines of both companies."

"I think it's going to be a good deal if they merge [correctly," said Darrin Gerard, sales manager at Salter Enterprises, a Marysville, Kan.-based HP solution provider.

Under the merged HP-Compaq, there are some obvious candidates for products that should be discontinued, Gerard said. "They need to just dump the Compaq printer line," he said. "HP's desktop workstation solutions are a lot better than Compaq's. We see a lot more Compaqs in here [for service and repair than we do for HPs."

"I think this will be a mess and especially cause confusion in the SMB channel--most SMB clients don't distinguish between volume and value, said Guthrie Chamberlain, president of Eagle Technologies Group, Marietta, Ohio. "It is mostly about price when they are purchasing--and then it is left up to the integrator to try getting the various machines to work together."

On the Compaq side, some solution providers said they felt uncertainty was the word of the day.

"This is going to be a big, big change. For better or for worse, I don't know," said Chase Luck, network infrastructure lead for Communication Technical Systems, a Roswell, Ga.-based Compaq solution provider. "Hopefully, it's a good thing. You get that unsure feeling because this is a big, big thing. Hopefully it will stir up [the industry."

STEVEN BURKE and EDWARD F. MOLTZEN contributed to this story.