HP Revamps Solution Provider Financing Initiatives

Kevin Gilroy, senior vice president of worldwide SMB Segment Operations, said that HP is reallocating funds from a number of megapartners who were "inappropriately" using the financing programs to reduce their costs to a a broader group of HP partners.

The new HP Partner Capitalization program, which provides financing for HP products and services only, will roll out in the United States effective Aug. 1.

The new program will be a big cash-flow boost for the several thousand partners in HP's SMB Partner Network, Gilroy said. At the same time, he said, it will negatively impact "some well-heeled, strong-balance-sheet partners who don't necessarily need a flooring subsidy."

Gilroy would not name the solution providers negatively impacted by the change, but some of the bigger players in the HP channel include CDW.

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The larger partners were using the funds in a variety of ways, including to improve their own profitability rather than for financing deals, Gilroy said. "Different partners used it in different ways," he said, refusing to name names. "We want to use the monies for what they were originally intended for, which is to extend them to partners with great skill sets that need HP to help them."

The aim of the program, Gilroy said, was not to cut costs for HP but to drive flooring and financing funds where they are most needed in the heart of the SMB solutions market.

The new Partner Capitalization Program, in effect, gets HP out of the business of funding third-party financing company initiatives from IBM Global Finance, GE Capital and Textron. Under a current indirect flooring program, those financing companies invoic HP monthly for providing the financing.

Gilroy said the new program, which is modeled after HP's powerful imaging and printing group's channel capitalization program, will take out about $1 million in administrative costs and Sales, General and Administrative (SG&A) expenses for HP and its partners.

The new program puts the financing funds directly in the hands of HP distributors Ingram Micro, Tech Data and Synnex. Those distributors can now use the cash to work with the third-party financing companies or come up with more creative programs aimed at attracting solution providers.

"Tech Data, Ingram and Synnex are superb at credit management of small [and] medium-sized business VARs," Gilroy said. "It's in their DNA. I don't think any manufacturer can match that. This gives them the flexibility working with us to utilize multiple tools."

Gilroy said it was unclear exactly how much total financing will be available to the 4,000 partners, given that it depends on sales performance. "We expect it to go up," he said. "We are very bullish about sales in the channel over the next couple of years."

Margie Young, program manager for partner development programs, said the new program is designed to have the same impact it has had in the imaging and printing market, where an estimated 5,000 HP partners are using the funds to win large deals that they never would have been able to finance. For example, she said, in a number of cases smaller partners with only tens of thousands of dollars in credit were able to get financing for solutions or product sales for more than a $100,000.

Young said that among the ways that distributors can use the funds are: increased credit (boosting a solution provider's credit from $50,000 to $100,000), extended payment terms (from 45 to 60 days), distributor credit card programs, distributor billing of end users via an HP agent program, and flooring (terms and conditions for VARs warehousing product).

Young anticipates that the biggest impact will be felt with increased credit for partners and extended payment terms.