Hard Deck Distress

Some SMB solution providers say HP direct-sales reps in recent weeks have attempted to raid their accounts by offering aggressive discounts only to customers buying directly from the vendor.

Fred Harrah, president of Network Company of California, San Diego, said he was preparing to handle a 35-node network upgrade for a longtime customer last month when he ran up against such as situation.

"A few days after I made my presentation, the CFO of the company got this letter from Compaq saying, 'Go out to our Web site and take 20 percent off of all your purchases there,' " he said.

After obtaining a copy of the letter, Harrah contacted HP to see if his company could also get the 20 percent discount on behalf of the customer, but the vendor declined.

"[The company told me that [the rationale for the offering was that they didn't want to lose business to Dell [Computer, but there was never any problem that they would lose the business," he said.

Because Network Company couldn't take advantage of the same discount HP was offering directly to the solution provider's customer, Harrah said he switched the account over to Dell equipment and retained the customer in the process.

"This was one of my loyal clients that had always bought Compaq [products through me," he said. "We helped them acquire Dell equipment just to spite Compaq."

The original HP Hard Deck program was account-specific rather than product-specific. Hard Deck originally mandated that HP's sales force would target 870 named accounts on a direct basis, leaving everything else as the exclusive domain of the channel.

That changed with HP's acquisition of Compaq. The Hard Deck strategy will, however, remain in effect in the Enterprise Systems Group and apply to higher-end enterprise offerings, said HP executives.

Kevin Gilroy, HP's vice president and general manager of commercial channel sales, acknowledged that pricing is an issue for partners but said that unhinging PCs, notebooks and Intel servers from Hard Deck will work "as long as the pricing is rational."

Gilroy said he will sit on a governance board at HP to ensure that pricing and sales-force compensation is neutral for HP's direct-sales reps and the channel.

Solution providers that attended a meeting of the former Compaq dealer council in Houston late last month said pricing issues were one of the problems highlighted. "[HP agreed that they need to restore the trust of the channel," said one solution provider who attended the meeting but asked not to be identified.

Steven Burke and Jeff O'Heir contributed to this story.