HPE Warns Partners Of ‘Price Adjustments’ On Server, GreenLake Orders In Wake Of Memory Price Increases

HPE is shortening “the quote validity windows to 14 days (excluding public sector, B2B, OEM),” down from 30 days, and has “updated the contract terms and conditions for server and GreenLake orders to allow for price adjustments until the date of shipment.”

HPE has implemented a tough new contract stipulation in the wake of rising memory prices and supply constraints that allows for price adjustments until the date of shipment on server and GreenLake orders.

In a letter to partners on Feb. 5, HPE Senior Vice President of Worldwide Channel and Partner Ecosystem Simon Ewington told partners HPE is making changes in “pricing and quote validity” in the wake of rising memory prices and supply constraints that are currently plaguing the industry.

Specifically, HPE is shortening “the quote validity windows to 14 days (excluding public sector, B2B, OEM),” down from 30 days, and has “updated the contract terms and conditions for server and GreenLake orders to allow for price adjustments until the date of shipment.”

The HPE letter to partners was first reported by IT Channel Oxygen on Feb. 6.

In an email to CRN, Ewington said pricing changes expected from the updated partner terms and conditions will be uncommon.

“While we have adjusted our terms and conditions, we do not anticipate changes for most partners, and pricing changes will be rare,” said Ewington. “We also give partners and customers the flexibility to adjust or cancel orders should, in rare cases, we need to adjust pricing, which is fair. It’s a two-way street.”

HPE declined to make Ewington available for an interview, citing the quiet period ahead of the release of its first fiscal quarter earnings.

HPE said in a statement to CRN that it expects pricing changes to only occur under the “rare” situation when “there are material changes to our forecasted increase in commodity costs.”

HPE said “most quotes are committed for 14 days, a window in which the customer can place a purchase order and HPE can accept the order at that price.”

The company said GreenLake orders accepted prior to February 4 are not impacted by the new terms and conditions.

HPE is also advising “sellers and partners should now obtain separate quotes for compute and block storage.”

Given the price increases and the impact on customers, Ewington reminded partners that “orders can be canceled at any point until shipment to provide maximum flexibility in these unprecedented times. “

HPE said the ability to cancel orders up until shipment applies to both partners and HPE.

Ewington said the components impacted by the crisis include “dynamic random-access memory (DRAM), NAND, solid-state drive (SSD) components, and high-performance networking silicon and optical components.”

The supply constraints are affecting “HPE offerings across compute, hybrid cloud, and networking portfolios, resulting in fluctuating delivery times and pricing,” said Ewington. “HPE will do all we can to maintain stability for customers, and we are committed to being transparent with these changes and partnering closely with you throughout this period,” he wrote.

Ewington urged partners to work closely with their HPE account managers on all “key deals as early as possible in the sales cycle, so we can help you drive toward solutions with the greatest availability for your customers’ needs.”

‘Everyone Is Dealing With This’

Pat O’Dell, managing partner at HPE stalwart partner CPP Associates, Clinton, N.J., said the current memory crisis and supply constraints are a “challenge” for HPE and the entire industry.

“Everyone is dealing with this,” O’Dell said. “It is a massive challenge that we are all working through. At the end of the day, it comes down to how clearly HPE can communicate and respond relative to competitive offerings. To their credit, HPE has been at the forefront in their communications. HPE’s [North America channel chief] Jeremiah Jenson had a partner-wide meeting a week ago to clearly communicate their approach, including the 14-day quote period, and that they plan to be competitive in their pricing strategies. While it is encouraging that HPE has provided quick and clear communication, I believe it is too early to tell how this will play out in the marketplace.”

O’Dell, the head of HPE’s North America Partner Advisory Council, said he understands that HPE needs to protect itself from selling product at a loss due to sharp price increases. That said, he wants to ensure customers understand the ramifications of the new HPE policies. “Unless we make it crystal clear for the customer, they will delay and not move forward,” he said.

“Most sizable organizations typically need more than 14 days to complete a purchasing cycle with input from the CFO, CIO and other influencers. Sometimes the CEO has to sign off on it,” O’Dell said. “It is really hard to get all of that done in 14 days.”

If suppliers can increase the price or cancel an order right up until the day of shipment, it likely is going to create “a lot of uncertainty and doubt in a customer’s mind that isn't typically there,” said O’Dell. “It is difficult enough to get customers to move forward in normal circumstances. When they think the price can go up and orders could be canceled, they are less likely to want to go in front of their CFO or executive committees to get approval. It adds another layer of complexity that I think a lot of customers might be afraid to deal with.”

Mike Vencel, president of Comport Consulting Corp., Ramsey, N.J., a top HPE enterprise partner, said he does not expect HPE sales to be impacted because the price increases and supply constraints are an industrywide issue. “I don’t view this as any kind of insurmountable crisis for HPE, but it is going to be a challenge for all of us,” he said.

“I think HPE has been really clear about what is going on and why they need to put some protections in place in a marketplace that is just too volatile for everybody,” he said. “Rightfully so, they have to protect themselves.”

Partners Seek Clarity

Bob Panos, president of American Digital, Schaumburg, Ill., No. 329 on the 2025 CRN Solution Provider 500, said he has questions he wants answered to get more clarity on the new HPE pricing policies.

Specifically, Panos said he wants a full understanding of the new rules around price quotes and price adjustments.

“If I quote a customer a server price and they order within the two-week validity period, and then HPE says it will take three weeks to ship and the day before it ships the price goes up $5,000, what happens?” he asked. “I want to make sure I am crystal clear on how to present this to a customer.”

In that case, HPE said the partner and the customer have the option to cancel the order, according to an HPE spokesperson when CRN asked for clarification on how that scenario would be handled.

The most important thing for American Digital is to properly set customer expectations as to what their options are if there is a price increase, Panos said.

“I want the customer to 100 percent understand their options if a price increase is presented to them at any point in time, whether it is two-week quote validity or whether it is upon shipment after they have placed the order,” said Panos. “I want to make sure customers understand their options.”

The big plus is partners and customers have the ability to cancel orders at any point up until shipment date, balancing the potential for price increases, said Panos. “That’s a positive,” he said. “It’s an equal response to an unprecedented market situation. That’s a tradeoff.”

As to the issue of building separate quotes for compute and block storage, Panos sees that as a move by HPE to limit the impact on partners with “fewer” quotes impacted by price changes.

Panos said he understands the predicament that HPE and the industry is in given the memory shortage and the supply constraints. “I assume this is the new normal for the foreseeable future,” he said. “I just want to understand how the process will work.”

The CEO of an HPE partner, who did not want to be identified, said the letter from HPE was “confusing,” but was cleared up after conversations with HPE reps. “We went to our people within HPE, and we got questions answered and clarity so that we can go about our business,” said the CEO.

The Test Of A True Partnership: How You ‘Share In That Pain’

The CEO of another large HPE partner, who did not want to be identified, said he also thought HPE was not as clear as it could have been in the letter to partners. “There are a lot of moving pieces to this for sure, but if we don’t have clarity, it could cost HPE some future opportunities,” said the CEO. “Every company is raising prices. HPE is not alone in that, but the way they are going about this is making it more complicated, which is going to confuse partners and customers alike.”

Bob Venero, founder and CEO of Future Tech Enterprise, Fort Lauderdale, Fla., an HPE partner and a Dell Titanium partner, said customers simply cannot work in an environment where pricing could change right up until the day of shipment.

“The message to customers is whatever price we give you, it is not real and we reserve the right to change that price the day that it ships,” he said. “Customers can’t operate in that model. There needs to be some clear lines and delineation on what they are trying to do and how they are going to do it. Customers are not going to take this sitting down if HPE is saying they can change their pricing at any time, whether you are in a fixed contract on product already delivered like GreenLake or whether it is on product you ordered and HPE is delayed due to supply constraints.”

Venero said everyone is grappling with rising memory prices and supply constraints, but solution providers and OEMs need to “share in the pain” with customers.

“When there are challenges in the market or things go bad, the test of a true partnership is how you share in that pain versus whether you pass 100 percent of that pain to the customer,” he said. “If you are passing 100 percent of that pain to the customer, you are not a partner, you are transactional. We have done some unnatural things in support of our customers to help them because of these cost constraints. We are doing things to help customers in absorbing some of the price increases. That is what you do in a partnership.”

Venero praised HP Inc. and Dell Technologies for being flexible in support of larger customers. “They are both looking at the long-term value of the customer versus short-term tactical price increases and operations,” he said. “You have to look at the long-term vision of a company and your customer, not the short-term gains you can make based on supply and demand constraints.”

Venero said the industry needs to look at the supply chain to possibly regulate purchasing so it does not exacerbate the current crisis. “We need to look at how we regulate purchasing so we don’t create unnecessary supply and demand challenges by letting customers buy a year’s worth of inventory that is just going to exacerbate the problem, and increase pricing and lack of availability of product,” he said. “You don’t want a run on the bank. That is what is happening here. There is a run on the bank, and the bank is the memory, the systems, the drives, and as companies are trying to get ahead of potential price increases, they are inflating price increases by creating additional demand that is not necessary.”