Hewlett-Packard is demanding that its global network of 154,000 channel partners pay to complete a regulatory compliance training program by Oct. 31 or risk losing their partner status.
HP recently notified some U.S.-based partners of the compliance initiative via a faxed letter that described the mandatory compliance requirement and a $120 fee "only payable by credit card." The delivery method, combined with the credit card-only terms, set off a bit of a furor among solution providers, some of whom said they initially believed the faxes to be a hoax.
But it's no scam. HP is demanding that partners register for the program, complete a short compliance training module with a third-party contractor, review and accept HP's Partner Code of Conduct and complete a questionnaire to assess compliance risk.
Joe Balsarotti, president of HP partner Software To Go, said the ASCII Group's online forum was buzzing with "ticked off" HP resellers as the faxes announcing the compliance program started arriving last month. The program itself was announced in June, according to Palo Alto, Calif.-based HP, but some partners say that the faxes were the first they heard about it.
Balsarotti, whose company is located in St. Peters, Mo., said partners were troubled because "HP is usually such a professional company," but the grainy, faxed correspondence "looks like a scam and it smells like a scam."
Risa Stolly, owner of Bethlehem, Penn.-based A-Prompt, also described the communications as "unprofessional." She said A-Prompt "threw the fax in the trash" before learning from her peers that the message was a legitimate communication from HP that now appears on the company's partner portal.
"We could have communicated this better," said a spokesperson for HP's Solution Providers Organization -- Americas. HP will be mailing partners directly with more information about the compliance program ahead of the Oct. 31 deadline, the spokesperson said.
The compliance effort is apparently aimed at preventing everything from bribery prosecutions associated with the U.S. Foreign Corrupt Practices Act (FCPA) to gray market movement of products aimed at avoiding taxes.
"This initiative seeks to protect both HP and HP partners by reducing business risk and unnecessary costs, penalties and goodwill damage that can result from noncompliant behavior, including government sanctions and legal action for violations," wrote Enrique Lores, senior vice president of HP's worldwide Solution Partners Organization and commercial sales, and Jon Hoak, vice president and chief ethics and compliance officer for HP, in a fax sent to HP partners that was obtained by ChannelWeb.com.
"Partners that fail to comply will face serious consequences, including potential loss of status as an HP partner. All HP partners are required to complete this program," the faxed message warns.
Integrity Interactive, the Waltham, Mass.-based company administering the compliance program, will receive the entirety of fees from participating partners, according to HP. That's no small amount of money -- at $120 per partner from the 154,000 worldwide partners HP reported having in 2008, the initiative would amount to better than $18 million in fees for Integrity Interactive should every partner pony up.
But it seems unlikely that HP's entire channel will participate in the program, given the reaction of some smaller partners. Some small solution providers that do only several thousand dollars of business with HP annually told Channelweb.com that they would rather buy their HP products from big box retailers like Office Max and Staples rather than pay the $120. They said they often get better pricing for their customers from those stores than from distributors.
For most larger partners, the fee they are being asked to pay isn't particularly troubling -- and partners with unspent market development funds from HP can pay for the program with that money. Partners contacted by Channelweb.com described the $120 as a "nuisance fee," but one that they would gladly pay if they knew more about the compliance program's purpose.
"It's the principle, not the amount," said one partner who asked not to be named, adding that he felt that HP had not communicated what partners would be receiving for their time and money.
"They're getting something back. The reason HP partnered with Integrity Interactive is for suppliers to get something tangible," said Richard Cellini, an Integrity Interactive senior vice president for business and legal affairs. "We keep a lock-encrypted PDF of their response. We maintain millions of these records for hundreds of companies around the world."
Next: FCPA Enforcement On The Rise