Hall-Mark President Expects Little Disruption From New HP Distribution Plan

Beginning in February, HP plans to shift its enterprise distributors, Hall-Mark, Arrow and Agilysis, from a fee-for-services model to one in which they will book revenue and set prices on enterprise storage and Unix servers.

"I'm not sure that at the end of the day [trying to recruit HP VARs away from rivals] is really good for business," Tepedino said at the distributor's HP Enterprise Partner Summit in Phoenix. "If you compare HP's channel to IBM's or Sun's, HP's is the smaller channel. The last thing HP needs for us to do is to keep their channel smaller by recruiting Arrow's or [Agilysis'] VARs."

Because distributors will be setting HP's product pricing, many VARs had speculated that a price battle would break out among distributors in an effort to sign up new HP enterprise solution providers.

"If [VARs] really want a better price, they are going to have to decide what else they don't want from a distributor partner," Tepedino said.

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Jim Kleeman, vice president and general manager of Avnet Hall-Mark's HP Business Unit, added, "Ninety percent of the discussions I'm having with VARs is about how can you help me grow the business. There's been no discussion on pricing."

Instead, Tepedino said that Hall-Mark would focus on bringing Sun VARs over to the HP platform or growing business through the distributor's alliance with Microsoft. Moreover, he said there is a significant opportunity to grow HP business now that the disruption caused by the Compaq merger has ended.

He said that Hall-Mark's HP business was flat in 2003 at about $500 million but that HP business looks good for 2004.

"Our HP business had its best quarter in two years coming out of October," he said. "And that didn't come at the expense of November and December. Last year, we had a good October [the last month of HP's fiscal fourth quarter] with HP only to have a lousy [first quarter]. It didn't happen this year. The volume is up and the pipeline looks good."