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HP to lower partner rebate gate in response to downturn

Paul Kunert

Hewlett-Packard is reviewing business unit compensation plans for top tier Gold partners and distributors that could see a reduction in the entry-level gate of Pay For Results rebates from next month.

Since July, the channel has called for the volume vendors to factor slowing demand into sales targets but as revealed by Microscope yesterday, the majority have yet to bend.

However HP is grasping the nettle and is holding discussions internally to decide which business units will reduce the gate to the first tranche of PFR earnings from 80% of the total sales target to 60%.

"This will bring some more stability and predictability for partners," said Dave Poskett, director of the solutions partner organisation at HP.

Sales targets are set quarterly and HP will take feedback from partners before deciding whether to extend the lower levels beyond its fiscal second quarter. Only Gold partners and distributors receive PFR, under changes made last November.

Poskett said it did not plan to cut partner rebates this year and overall targets set were "realistic".

The impact of attach rates, part of the PFR rebate metric, differs per product category and HP is still trying to build them into the targets but was unable to provide further details.

Andy Gass, managing director at Computer 2000, said HP had to be applauded for providing "more predictable returns in an uncertain environment" but he hoped other manufacturers would take similar steps.

"This is an example of a vendor working to support the channel and take some volatility out of margin management, we would urge others to follow HP's lead," he said.

The targets set by HP have been aggressive, like the rest of the vendor community, said Andrew Henderson, commercial director at Lanway, "being the first to support the channel in response to the economic downturn is a very positive step."

However, some feel HP could take the rebate restructuring one step further as it has in the Business Critical Server business unit. In November, the vendor scrapped the minimum threshold and bonus accelerators - partners now get a straight 1.5% rebate on all sales.

For BCS resellers that had achieved the bonus accelerator, the new structure means they are earning less but one said "I would still rather have a deterministic business model than one skewed toward artificial targets."

A decision on the rebate changes are expected for the week commencing 26 January.

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