Gilroy: HP Reps Should Not Dictate Margin


Pledges to put an end to controversial practice cited by some SMB VARs


Kevin Gilroy, Hewlett-Packard's vice president and general manager of commercial channels in the Americas, this week pledged to stop HP field reps from dictating profit margins on products after vociferous complaints from several partners at Ingram Micro's VentureTech Network conference.

"In the private sector, if there is an HP person telling you how to price the product to the end user, I have a huge issue with this, and I am sure the legal department at HP has an issue with it, too," said Gilroy in a panel session at the conference, held in Hollywood. "I want to hear about it as soon as any of you see that happening because that is absolutely inappropriate."

Gilroy's comments drew applause from the nearly 400 VentureTech partners in attendance. His remarks came after several VentureTech members charged that HP field reps are dictating how much profit margin they can make on certain products.

Chuck Kokoska, president of The Computer Specialists, a solution provider in Whitesboro, N.Y., said he has shifted about $500,000 of HP business to Dell in the past four months because HP reps in both the public and private sector are dictating how much margin he can make on HP products.

"When HP starts to tell me how to do my business, which is what you guys are doing, I am sending my business to Dell," he told Gilroy.

Kokoska said the pricing issue emerged about four months ago when HP began canceling his commission on certain products because his price did not match the exact price HP agreed to through its Big Deal program. The problem came, Kokoska said, when he cut the price of systems to win a deal, taking the difference out of his own margin, or added cost in order to cover services and integrated software charges.

Kokoska was doubly frustrated because he had taken ownership of the systems.

"I don't understand why HP is doing this. When I take the margin out of my own pocket, I'm not taking anything away from HP, so it's a big slap in the face," he said. "We're very upset to say the least. If manufacturers are relying on me to provide an overall solution for the customer, they have no right dictating to me what I charge."

Ron Cook, president of Connecting Point, a $12 million solution provider in Las Vegas, said he has also encountered HP reps who have dictated how much margin he should make on products. "When is HP going to do something about stopping these channel problems that exist, and they are pretty serious right now, before you guys are dead?" he asked Gilroy.

Cook said he believes HP is artificially trying to move 50 percent of its personal systems sales to HP direct. "They are doing everything they can to reach 50 percent," he said. "I believe HP doesn't trust the channel."

Steve Harper, president of Network Management Group, a solution provider in Hutchinson, Kan., said he has not seen HP channel conflict issues in his region.

"I have no issues with HP," said Harper, a member of HP's SMB Network.

Harper's biggest concern is making sure HP and other vendors do not sell products at a lower price on the Internet or through large partners such as CDW or Insight.

"I just want a level playing field," he said.