Elite Partners Concerned By HP Policy Shift

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Some of Hewlett-Packard's largest solution providers feel they're being forced to choose between price and delivery as a result of an HP policy shift.

Starting Sept. 1, HP Gold and Platinum solution providers could pay more for HP products they procure through volume distributors Ingram Micro, Tech Data and Synnex rather than directly from HP, solution providers said.

"I'm disappointed," said John DeRocker, senior vice president of sales and marketing at Nexus Information Systems, a Plymouth, Minn., Gold HP solution provider. "I think it's a bad move. With distribution, the product is there. With [HP] PartnerDirect, it could take three weeks."

Jeff Sturgeon, CEO of Columbus, Ohio-based Sarcom, a Platinum HP partner that buys from distribution and HP, said because of the new policy, Sarcom will source products from HP if price is its most important consideration or from a distributor if delivery and availability are most important for a particular order.

The changes were triggered by HP's move to balance financing across Gold and Platinum and SMB partner levels, channel executives said.

Previously, broadline distributors could invoice HP for the flooring costs of products sold to Platinum and Gold solution providers. The process allowed the distributors to match HP PartnerDirect prices for these classes of partner. As of Sept. 1, however, HP will no longer reimburse the distributors for the flooring.

HP, Palo Alto, Calif., plans to use those funds instead for its Partner Capitalization program, intended to allocate credit to solution providers with greater need.
HP maintains its pricing hasn't changed, but Gold and Platinum solution providers say their cost of procuring products from distributors has increased because of the flooring shift.

"It's not HP's call to speculate what credit terms [distributors] may offer, including flooring no longer subsidized by HP. Distribution is free to come up with alternative credit relationships based on relationships with that partner," said Dave Pansen, vice president of channel distribution sales at HP. "To operate under the assumption that [distributors] will pass through the subsidy removed by HP seems unwarranted."

Some solution providers said they can still receive the flooring subsidy by purchasing through PartnerDirect, but HP said that these funds would only be granted on an exception basis.

At least one distributor has already seen a decline in HP business. In its earnings report last week, Tech Data, Clearwater, Fla., said HP represented 27 percent of sales in the second fiscal quarter ended July 31, down from 31 percent a year ago.

Tech Data Chairman and CEO Steve Raymund said the major reason for the fall-off is HP's move to "pursue a more hybrid-oriented channel model, which means that distribution as a segment captures less."

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