HP Distributors To Take Title Back On Enterprise Products

Under the new model, distributors Arrow Electronics, Avnet Hall-Mark and Pioneer-Standard Electronics will take title to HP server, storage and OpenView software products, but they will not carry any inventory. HP will continue to hold the inventory and ship the products directly to solution providers or their end-user customers. The new program also allows distributors to set their own prices on products covered by the program instead of relying on a price set by HP.

In addition, Ingram Micro has been added to the HIP program for enterprise storage products, said Dan Vertrees, HP's vice president and general manager of enterprise partners, Americas.

The changes take effect November 1 and they are the result of months of meetings between the distributors and HP, HP and distribution executives said.

"This gives us flexibility to generate more business from the available market. We want to increase our available market, we want to put flexibility and business process controls back into the hands of HIP partners," Vertrees said.

HP introduced the HiP model three years ago with Arrow and Avnet. The distributors gave up top-line inventory for the products to HP and were given a fee-for-service for managing reseller accounts, recruitment, marketing services, solution design, pre-sales support, order placement and invoicing.

After some initial bumps, distributors said they successfully moved their business to the new model, but executives from Arrow and Avnet said their HP business did not grow during that time.

Under the enhanced HiP program, they are hopeful that HP sales can flourish again.

"We're back in the sales business again. I hope we can robustly grow and generate a healthy top line," said Joe Burke, vice president and general manager of enterprise computing solutions at Arrow Electronics' North American Computer Products Group, Englewood, Colo.

"Over the [three-year] period, IBM did grow faster than HP. The non-traditional model was part of that. With HP making these changes, both we and HP will be in better position to grow," said Steve Tepedino, president of Avnet Hall-Mark, Tempe, Ariz.

Still, the distributors said it was too early to tell if the new HiP program will make them more money than the fee-for-service model.

"We are the new guy on the block, so we'll know in several months if we're more or less profitable, but we think this is terrific. It's all upside as far as we're concerned," said Pat O'Connor, vice president of marketing at Pioneer-Standard, Cleveland.

Michael Haley, vice president of account development, Enterprise Computing Solutions, at Arrow Electronics believes the distributor can make more money if it executes on the initiatives HP has put in place. "Three or six months out I can tell you if we were more profitable or less profitable," he said.

HP will work with the distributors to minimize conflict during the transition period, Vertrees said.

"Each one of the reseller partners already has established relationships [with distributors]. That engagement process is pretty well formed," he said.

Tech Data will not join Ingram Micro in HIP for enterprise storage products, despite the fact that it carries some of those products in North America, particularly in Canada, Vertrees said.

"At this time, there are no plans to move additional distributors into HiP. We will continually review the products and this distribution model to determine if there might be some changes for future business," Vertrees said.

CRAIG ZARLEY contributed to this story.