Distribution Dilemma

At the same time, the vendor is poised to add a third HP-Unix Partner Development Manager (PDM) distributor.

Channel sources and others close to HP said the vendor plans to add Cleveland-based Pioneer-Standard Electronics to its list of HP-Unix PDMs, which currently includes only Arrow SBM, Englewood, Colo., and Avnet Hall-Mark, Tempe, Ariz.

"There seems to be no net gain for HP [by adding Pioneer-Standard," said Geoffrey Lilien, president of Lilien Systems, an HP solution provider in Mill Valley, Calif. "It would just be splitting up the business that Arrow and Avnet already have."

Pioneer-Standard declined to comment, as did Arrow and Avnet.

HP declined to comment on adding Pioneer-Standard to the PDM mix, but an HP spokesman said a decision has not been made regarding how to handle systems integrators in its enterprise distribution model.

Currently, large HP systems integrators enjoy a pricing advantage of up to four pointsover other HP channel partners, HP's enterprise solution providers say.

The pricing disparity with HP's large systems integrator partners,including Accenture, Cap Gemini Ernst and Young, BearingPoint (formerly KPMG Consulting), EDS and Braxton (formerly Deloitte Consulting),is a major sticking point with HP's enterprise solution providers as HP moves to a pricing parity model between its channel and direct organization.

"We do the same high-end consulting [as the large systems integrators, but we lose out on the deal because they have a two- to four-point pricing advantage," said Jeff Reed, executive vice president of product marketing at U.S. Logical, Bloomington Hills, Mich., HP's largest North American solution provider.

Logical competes in the product arena with systems integrators primarily in the HP-Unix product space. But company executives said the pricing advantage doesn't appear to be tied to the fact that systems integrators source their HP-Unix systems directly from HP.

Logical, the last North American solution provider that buys directly from HP, just signed a deal to source all of its HP enterprise products from Arrow SBM.

John Hafen, president of U.S. Logical, said the solution provider would be shifting in excess of $100 million in annual HP purchases to Arrow SBM.

Reed said there was no financial benefit in continuing to buy direct from HP because his company incurred infrastructure costs and realized no pricing advantage from the direct relationship. The deal, however, means all of HP's North American solution providers will now source HP-Unix products from HP's PDM distributors, leaving only the large systems integrators outside of the PDM model.

PDM distributors work on a fee-for-service basis, taking and managing orders, with HP direct-shipping products to solution providers or their customers.

Some solution providers said systems integrators were given bigger product discounts because HP felt they could get into large-account deals early and have a greater influence on customers' platform selections.