HP clamps down on marketing funds abuse

Resellers must show willingness to generate their own business leads

Hewlett Packard (HP) hopes to eliminate the misuse of its marketing development funds by making the money available only to resellers that demonstrate a willingness to generate their own business leads.

The allocation of such funding is coming under tighter scrutiny throughout the IT industry.

Once seen by some resellers as 'soft margin', HP is joining a growing list of vendors which now require clear evidence of demand-generation and return on investment before money is allocated.

Mike Morgan, the newly appointed director of channel and commercial sales at HP, reinforced this growing trend last week.

He issued a stark warning to the company's reseller partners at a launch of two new StorageWorks network attached storage systems at an event co-ordinated by distributor Ideal Hardware in Birmingham.

According to delegates at the event, Morgan hinted that HP intends to police the allocation of funds more stringently in the future, and stressed that resellers would have to demonstrate solid business cases.

Ian French, chief executive of Ideal Hardware, said: "People who get marketing development funds should be using that money to develop their marketing. For example, Ideal uses it to organise events and for the education of its partners.

"Unfortunately, there are certain resellers out there that are using it for non-marketing purposes.

"I think all manufacturers are looking closely at how they allocate their funds. There has been inefficiency in the past and manufacturers are going to be a bit more sensible in the future.

"The majority of distributors and resellers won't have a problem with this."

Keith Asher, storage business manager at reseller Repton, added: "Previously, some organisations have abused funds, and there has not been a vehicle in place to police it before.

"This new policy will encourage resellers to go out there and win new business, which can only be good for the market.

"For many, many years the marketing development funds system has been abused and used in ways for which it was not intended."

John Northam, lead consultant at former Compaq reseller Keltec, said: "I think HP should clamp down. This will help the channel and the customer, who will get a better service as a result."