HP To VARs: It's Payback Time

Last February, Compaq applied a software patch to its Compaq Services Network system that reintroduced old code into the system, including the wrong reimbursement rates, said Walter Mello, now director of HP channel services for North America.

"We are notifying partners who are impacted through their service partner managers and working directly with partners to resolve any issues," Mello said in an e-mail.

Warranty claims from late February until mid-April were incorrectly categorized as on-site events in Compaq's system, according to an HP spokeswoman. For example, a service provider may have been paid as much as $250 for a replacement mouse sent to a customer because the system thought the service provider was performing on-site work, the spokeswoman said.

Normally, Compaq pays less money to authorized service providers for warranty events in which end users can replace the products themselves, a category called End-User Replaceable Parts (EURP).

HP wants solution providers to pay back for claims categorized as EURP I, mostly external parts such as mice and keyboards. The manufacturer will absorb the loss on EURP II claims, which include internal components such as hard drives and memory, Mello said.

HP only wants reimbursement for EURP I events because that program has been in place for two years. Solution providers still may not be familiar with EURP II, which started last September, and it would be unfair to ask for reimbursement, Mello said. Compaq expects to lose about $1 million on the EURP II events, while the EURP I paybacks will generate less than that, said the HP spokeswoman. Most authorized service providers were overpaid less than $1,000 for EURP I events, she said.

Compaq will reclaim the money by debiting the appropriate amount from solution providers' future warranty reimbursement claims, the spokeswoman said.

"We're not real pleased about [paying HP back," said Pete Busam, vice president and COO at Decisive Business Systems, a $4.5 million solution provider and authorized Compaq service provider in Pennsauken, N.J. "How come [HP pays out [reimbursements every three months but they expect it back in one month? I don't think that's a real legitimate way to do business."

HP wants Decisive Business Systems to pay back $3,000, Busam said.

"Three-thousand dollars in a tight economy is a lot of cash for a small company," Busam said.

The EURP II program led to a slew of complaints last winter when Compaq expanded the list of components it expects end users to replace themselves to include internal components that require opening the box.

Many solution providers said they won't ask their customers to do that. Decisive Business Systems is still replacing all warranty parts, regardless of whether Compaq pays them back or not.

"You call us and we handle it for you," Busam said. "Today, you need to stay as close to your customers as possible. One thing of value in tough times is an extra bonus you give on customer service."

Based on partner feedback, HP recently removed some parts from the EURP II list, raising the reimbursement rates for DLT and DAT tape drives, SCSI controllers and parts costing more than $2,000.

HP has yet to decide the future of EURP I and II under the new company. The programs are being evaluated along with all other channel programs, the HP spokeswoman said.