HP channel divided over Ts & Cs

Cash discount for prompt payment at core of vendor's new contract

Some partners of the new Hewlett Packard (HP) are split over changes to its Terms & Conditions which it announced last week, but the company has claimed that the contract will reduce administrative "burdens" and speed up cash flow in the channel.

Andy Vickers, commercial channel director at HP, said that the contract is divided into three main focus areas and will affect 24 of its main direct-touch partners, which are mostly large resellers and distributors.

The cash discount for prompt payment is at the core of the contract, while HP has borrowed Compaq's reward scheme for hitting targets, called Pay-For-Results. This will allow partners to increase their margin, according to Vickers. Marketing development funds form the third part of the contract.

As expected, HP has cut payment time for its inherited Compaq partners from 30 days to 15 and has reduced its two per cent discount for prompt payment to 1.5 per cent.

"People could see the cash discount as the most contentious part of the new terms and conditions, but it's nothing new," said Vickers.

"Partners have a choice about whether they participate in this or not. It's all about cash flow, and it is up to the financial directors within each company to decide whether to pay us within the 15 days or not."

Vickers also pointed out that Compaq partners were not previously offered a discount for prompt payment.

Commenting on the cash discount, Mark Walker, director at Ideal Enterprise Solutions, said: "It could take a lot of working capital out of the channel. If some firms can't pay within the 15 days it may put them at a disadvantage."

Gary Fowle, commercial director at distributor Computer 2000, agreed that some firms would find it hard to pay in the allotted time, but added that it would pass on savings to partners.

"Not every distributor will have enough cash in the bank to be able to do this," he said. "It is HP's way of making sure it is partnering with strong firms that are able to pay the bills at the end of the month."

Andy Dow, commercial director at distributor Westcoast, said: "The new Ts & Cs will have an impact on the channel, particularly the legacy Compaq distributors. The changes for the legacy HP distributors is far less of an issue."