Pushing For Agents

Under the agent model, HP ships the product direct to solution providers' customers and pays the partners a 4 percent to 12 percent commission.

HP would like to increase the amount of PCs moving through the agent model to 50 percent from about 10 percent today, said Michael Winkler, executive vice president of worldwide operations at HP.

Some solution providers and distribution executives are skeptical of HP's plan.

Winkler conceded that solution providers may fear HP will take those accounts direct once they have the account information. "Clearly, they have some reason to have some suspicion of us," he said. "[But we are as committed to these guys as we always were because they are 70 percent of [our market." There are clear rules of engagement preventing HP from poaching agent accounts that VARs have cultivated, he said, adding that HP has an arbitration process to resolve disputes and make sure "there are no rogue salesmen out there."

HP representatives recently visited with Steve Israel, executive vice president of AMC, a solution provider in New York, to try to sell him on the agent model, but Israel said he wasn't buying. As one of the largest Compaq PC dealers in New York, Israel said he prefers to sell the systems the old-fashioned way: taking an order from the customer, booking the order, configuring the systems at AMC's warehouse, and integrating the systems at the customer's site. Under that model, Israel said, VARs are in full control of the total customer relationship.

Israel said he is also against the agent model because he estimates he will receive 6 percent margin vs. about 12 percent today. He also receives credits, rebates and marketing funds based on his sales of Compaq PCs, which would be greatly reduced under the agent model, he said. "They want me to sell under an agent's model when I have to compete against a CDW that buys at distribution prices but sells like a reseller? It's like trying to compete against Ingram Micro or Tech Data. There is just no way I can do that," he said.

Several small-business solution providers also said HP is underestimating the difficulty in providing the same wide range of services that distributors offer, including credit.

"The amount that allegedly will go to the agency model, that's a lot of volume, significantly more than these companies have ever done before," said Mike Grainger, president and COO of Ingram Micro.

Still, HP thinks it is the right decision. "From my perspective, the agent model is a tool in a toolbox, and in certain deals, it makes sense," said Kevin Gilroy, HP vice president and general manager of North America Commercial Channel Sales.

Kristen Kenedy and Scott Campbell contributed to this story.