Hewlett-Packard is raising the sales bar for public sector VARs, but at the same time increasing margins for those that reach the new annual sales target.
HP Vice President of Public Sector Solution Partners Organization (SPO) Michael Humke said public sector VARs that want to obtain higher sales incentives will have to reach an annual $500,000 sales target effective Feb. 1, 2009, up from the current annual sales mark of $50,000.
Humke said the change will likely bring the number of partners playing at the elite level in HP's public sector program, which includes all education and government business, from an estimated 2,200 down to 400. Those 400 top tier public sector partners will receive higher margins in areas such as the storage market where margins will jump from 12 percent to as much as 20 percent, said Humke. He said Smart Buy standard SKUs with no special bid pricing will jump from six percent to nine percent.
Humke stressed that the new sales bar will not stop other partners that do not meet the annual sales target from selling in the public sector.
HP Partners gathered at the Americas Partner conference said the changes will eliminate partners that are not bonafide public sector VARs.
"If you're only doing $50,000 in sales, you're not in the program anyway," said Rick Chernick, CEO of Camera Corner Connecting Point, an HP solution provider in Green Bay, Wis. "This will get rid of the cherry pickers. I wish they'd raise it to $1 million."
Steve Harper, president of NMGI, a solution provider in Hutchinson, Kansas, agreed. "$500,000 a year is nothing to play in this business," he said.
Humke said he was initially considering a $1 million sales target for the higher incentives. "If you are doing a $1 million plus then you are invested in this business," he said. "You are not sitting there waiting for phone calls. You are driving and building relationships. Let's be honest: this is a relationship business."
Currently HP does about 50 percent of its public sector business through the channel and 50 percent direct, said Humke. "We are looking for committed partners and going to reward them," he said. "I want to reward people for growth."
"No one has picked up the phone to complain," said Humke of the new sales targets. "Partners that really want to play are going to play."