HP drops quarterly targets for partners

Hewlett-Packard scraps policy of paying authorised resellers on their ability to meet pre-agreed quarterly targets

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By  Andrew Seymour Published  February 3, 2009

Hewlett-Packard has scrapped its policy of paying authorised resellers on their ability to meet pre-agreed quarterly targets and will instead reward them for every dollar of business they transact.

News of the dramatic move will come as a relief to Middle East partners concerned that their profitability is at risk because the current lack of market visibility reduces their chances of achieving rebate-driven targets.

Under the previous model that HP has always implemented, resellers were rewarded for attaining quarterly sales objectives and had to achieve at least 60% of their target to earn compensation.

However, the new arrangement — introduced across EMEA this week — accounts for the fact it is more difficult to set quarterly business plans in the present climate by rewarding partners for the level of business they record. That means a reseller that achieved less than 60% of its target under the former structure— and therefore wouldn’t have been paid a rebate — is now guaranteed compensation.

“This is a very major change and a strong reaction from HP to the economic situation in the market,” said Bernhard Isemann, Solutions Partner Organisation manager at HP Middle East. “It will lead to higher profitability in the channel at a time when companies need profitability to show to their shareholders, even if they haven’t achieved the performance they were expecting.”

Although the vendor has axed the quarterly target, all other elements of its Preferred Partner Programme — such as deal registration and funnel tracking — remain in place to reward partners for their investment in the sales cycle.

The overhaul doesn’t just stop at the reseller tier, with HP also modifying its rebate system for distributors and axing quarterly targets in favour of monthly business plans.

Up to now, distributors have been compensated for achieving a target based on ‘sell-in’ figures, or rather the quantity of stock HP requires them to buy to qualify for a rebate.

That has now been replaced by a ‘sell-out’ model, which means distributors are rewarded for the volume of stock they sell to resellers. The adjustment should alleviate cases of excessive inventory in the distribution channel by giving distributors greater decision-making power when it comes to the quantity of stock they purchase.

“In the current market climate the best thing to do is monitor the situation on a monthly basis so we will sit down with distributors every month to plan the business and they can then place orders against their performance,” explained Isemann. “We won’t force them to deliver against targets and we will compensate them for each piece of business they do, which completely moves distribution from a push model to a sell-out driven business model.”

3211 days ago
Parmod Kalia

This is a great news if HP Target will be compensated on the volume we sell and it will help us to make little profit, otherwise due to US dollars gone around 10 % high in Kuwait market and the HP has increased already 2.5% in jan,09 is a setback for local customer and sale volume and profit is nil in spite of spending million of dollars on HP products.

3212 days ago
rajeev bajpai

Given the current market situation and the gloomy atmosphere staring at us, perhaps the most sensible thing to do. In this kind of market vendors must look for commitment and not the target. Had this been done earlier the health of the channel could have been much better. and who know perhaps techdata in ME could have been around ! HP has surely demonstrated the leadership in the channel by this move, and hope the other vendors to follow suit !!

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