Some VARs Run Into 'Direct' Conflicts

Bob Venero, CEO of FutureTech, a Holbrook, N.Y.-based solution provider, said that just two weeks ago, HP Direct called one of FutureTech's customers in a bid to move a deal under an agent commission model rather than through his company.

"It was combative, and we had to get our channel representative engaged to put out the fire," Venero said. Although the situation ultimately was resolved, Venero had nothing good to say about HP's agent model. "The HP agent model eliminates the VAR, the VAR's top-line revenue and the control of the account," he said.

Rich Tear, CEO of CSCI, a San Diego-based solution provider, said earlier this year HP telesales reps targeted one of his accounts. He called the incident a "big flare-up" but said HP resolved the problem by making him an agent in the account.

Still, Tear said, HP risks losing business when its telesales staff try to undercut channel prices. He noted that customers are used to the services and hand-holding provided by the solution provider.

"We don't want the customer to be held hostage by the price," Tear said. "We can do a better job [of servicing the customer than HP Direct can]. If the customer experience goes downhill because they got a better price, [HP] can lose the customer. We don't lose customers."

HP said in February that it is working on new rules of engagement for small and midsize businesses, similar to what it has put in place for enterprise accounts. But the company has yet to roll out the plan, which in part is designed to ease conflict with HP direct telesales reps.

John Thompson, vice president and general manager for the HP Americas Solution Partners Organization, said he was "well aware" that HP sends mixed messages to its SMB channel partners.

"This is a very important issue for us, and we are diligently working on a comprehensive plan to resolve the situation," Thompson said.

Rick Chernick, CEO of Camera Corner Connecting Point, a solution provider in Green Bay, Wis., said he recently has not run into a conflict with HP in his registered accounts.

"But IBM just nailed me," Chernick said. "I just had a customer that I have been selling to for years, and all of a sudden IBM comes in the back door direct and offers them a reduced price and makes me look like an idiot and [like I] wasn't being honest with my customer."

Venero said he has not run into any conflicts lately with Lenovo, which acquired IBM's PC business. In fact, he is looking forward to the new Lenovo value-priced line, which he said should allow solution providers to be more competitive in battling Dell. Lenovo, which completed its deal with IBM on May 1, has not set a timetable for when it will bring the value-priced line to the market.

Conflict is definitely more heated with HP's Colorado Springs, Colo., call center than with telesales from other vendors, including IBM and Lenovo, according to John Marks, CEO of JDM Infrastructure, a Rosemont, Ill.-based solution provider.

"Those HP reps are compensated for direct business," he said. "They are not compensated to bring things through the channel."

Nevertheless, even IBM would quote lower prices to end users if they called the vendor directly, Marks noted. "I am hoping that Lenovo will be different," he said. "Manufacturers need to do more due diligence before they flippantly quote prices to end users."

Vendors' direct moves are taking some of the wind out of JDM's sails, Marks added. "Our reps are losing a lot of momentum and enthusiasm because manufacturers like HP are taking deals direct," he said. "This [comes] at a time when manufacturers are talking about how channel-friendly they are."

Stephen Mungall, vice president of inside and solution provider sales for Lenovo Americas, has promised that the company's inside-sales reps will not call VAR partners' customers. Lenovo is segmenting customer lists to make sure that its inside-sales reps do not call customers that prefer to buy through the channel, he said last week.

"We have not finished the work, but we hope to have it done in the next couple of weeks," Mungall said.

Lenovo wants to be efficient selling to customers via its inside-sales reps, regardless of whether the products are delivered through partners or Lenovo, Mungall said. Lenovo has five call centers across the Americas and several hundred inside-sales reps.

The company is moving more inside-sales reps to a channel-neutral compensation model, Mungall said. However, he acknowledged that some reps are compensated for direct-sales quotas.

"Those are the ones we want to make sure understand who not to call," he said.