HP plans changes to ESSN distributor contracts


HP plans changes to ESSN distributor contracts

Microscope contributor

HP is planning to introduce a contractual threshold for ESSN distributors to bolster its foothold in the unattended space - resellers not managed by the vendor - in a move that some logistics partners fear may lead to dramatic price cutting.

The measure will be introduced on 1 May for six months, and is designed to make distributors grow their breadth of small and medium-sized accounts, but final details on the threshold will not be made available to distributors until next month.

"HP will put the channel on special measures so that every ESSN distributor across Europe has to comply with targets for the unmanaged space," said one partner.

The concern from wholesalers is that there will be a bun fight, with one warning: "contrived targets will cause chaos because distributors will be selling at cost plus bugger all to build business with the unmanaged space".

Programmes that challenge margins were a concern, said another, but he warned that a price-led strategy in ESSN was unsustainable.

"HP is not trying to drive pricing pressure; it is trying to get distributors to add value to up-and-coming resellers through technical support and help with quotations," he said.

Distributors that cannot meet the target threshold may lose the rights to sell ESSN kit, said one insider: "It's a contractual threshold and if distributors do not meet the terms, HP has the right to can them."

MicroScope understands there will be no changes to the compensation envelope, but conspiracy theorists reckon the re-engineering may lead to the exit of Arrow, which they claimed is not set up to deal with smaller resellers.

The vendor has already publicly stated that it wants ESSN distributors to carry the entire line card to push its Converged Infrastructure strategy, and a source close to the situation predicted, "The threshold will be used to exit Arrow."

However, Arrow transacts $500m worth of business annually with HP in the US according to sources which believe its corporate HQ is locked in talks with the vendor about the future, "Arrow is using its financial clout to remain in the fold".

HP refused to comment.

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