VARs On HP-CDW Sales Deal: What About Us?
"There are a lot of dealers like us that are doing our best to cover that area. If CDW wants to compete, then they should do it at their own expense. HP should not be subsidizing them to compete with their other dealers," said Mark Singh, president of ValCom Computer Center, an HP solution provider in Midland, Texas.
Singh said he's worried that HP was subsidizing one large solution provider to compete against smaller ones. "If HP is paying for this, it seems like the HP direct and#91;call centerand#93; operation in another form, which we never liked," he said. "It was competing against us. I don't think and#91;white spaceand#93; really exists."
Thus far, solution providers said HP hasn't contacted them regarding its new alliance with CDW, which is expected to begin in September and be fully under way by January 2009.
According to a CDW memo obtained by Everything Channel, CDW and HP have reached agreement to co-fund 110 new HP-only sales people inside the Vernon Hills, Ill.-based solution provider to target accounts with 499 or fewer employees. HP will supply CDW leads by comparing Dun and Bradstreet's customer list against historical sales of HP products through HP direct, HP channel partners and CDW, according to the memo. The result will be more than 500,000 net new customers for CDW to target, the memo said.
Some solution providers questioned whether 500,000 new accounts are even possible without encroaching on other VARs' customers.
Steve Harper, president of NMGI, a Hutchinson, Kansas-based solution provider, said HP has been a great vendor partner recently, passing on numerous leads to NMGI. He had not heard of the HP-CDW deal until a reporter told him and he was unsure if that alliance will impact his incoming leads.
"The only downside I see is CDW traditionally has tried to lead with price, and now for accounts that we might be in together, it certainly can't help my margins," Harper said.
A differentiator for solution providers like NMGI will continue to be the local touch and service they provide, said Harper.
"We're leading with services now and dragging HP along. We're not as focused on products as we once were. As long as we continue the education of customers on service and support, I think we'll be fine," he said.
Thus far, both CDW and HP are keeping mum on how their initiative could impact the rest of the channel. CDW issued a statement through a spokesperson that said, "CDW works with its major partners on sales and marketing programs that we believe will help serve our mutual customers. We do not discuss details of these programs. As always, CDW is here to meet our customers' needs, and one way we do that is to offer and sell a wide array of products, from many manufacturers, in the categories we carry."
Through a spokesperson, Adrian Jones, vice president and general manager, HP Americas Solution Partners Organization, issued a statement that read: "HP regularly invests in both large and small channel partners on new growth initiatives. While we don't comment on specifics for competitive reasons, over the last year we have initiated a number of partner programs focused on new business, co-marketing, vertical markets and solutions. We believe these investments will generate more growth opportunities for all HP partners."
Meanwhile, other channel observers were just as surprised by the deal as HP VARs.
Brian Alexander, managing director of equity research at Raymond James and Associates, said HP has voiced concerns about its enterprise momentum, but not so much about its SMB reach.
"It's interesting to see them do something aimed at and#91;SMBand#93;," Alexander said. While HP's strategy appears to target new accounts for HP, it could present issues for SMB solution providers also trying to sell into those accounts.
"It gives CDW a more focused approach for selling HP product. If I'm an HP reseller, the competition just got a little stiffer," Alexander said.
It's also possible that HP wasn't getting the results it wanted from solution providers such as CDW, Alexander said.
"and#91;HP CEO Markand#93; Hurd has preached partner loyalty. This fits into that framework. He looks at DMRs, he doesn't see them focused on their product line," Alexander said. Because HP and CDW aren't detailing the strategy, it's also possible that CDW's non-HP sales folks could be calling into the same account, which could create conflict within the solution provider. CDW will have to be careful on how it targets new customers, Alexander said.
"It depends on how many new accounts HP is sending to CDW and are they already being targeted. That's the missing piece of info. It sounds like HP could be careful selling only to accounts that are underrepresented by HP, but those accounts could be well represented by other vendors through CDW," he said.