HP Gives CDW Green Light For Two-Way, Four-Way HP 9000 Systems

Hewlett-Packard recently authorized CDW to sell two- and four-way HP 9000 servers to SMB customers, but the move has some reseller partners concerned over margins.

February 13, 2004

3 Min Read
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Hewlett-Packard recently authorized CDW to sell two- and four-way HP 9000 servers to SMB customers. HP has also blessed an alliance under which CDW will refer leads for HP-UX systems above four-way to Agilysys, in Cleveland. The moves have some reseller partners concerned over margins.

"I don't know any HP [enterprise] reseller that is happy," said Rich Baldwin, president and CEO of Nth Generation, a San Diego-based solution provider and one of HP's biggest storage partners. "The biggest issue is that CDW will quote a lot of low-cost products and hurt the efforts of legitimate solution providers."

Complicating the issue is the fact that Agilysys has both a distribution arm, KeyLink Systems, and an Enterprise Systems Group (ESG), which works directly with end users.

Mike Cox, president and CEO of Logicalis, one of HP's largest enterprise solution providers in Bloomfield Hills, Mich., said he was concerned that CDW will not only compete on price at the low end but will feed leads to Agilysys' integration group for high-end systems. "Our fear is that we or some other reseller will take the process down the sales path and somehow CDW will get a lead to Agilysys' ESG or another Agilysys reseller who will come in and under-bid us because they don't have the cost associated with the sales cycle," he said.

Dan Vertrees, HP's vice president and general manager of enterprise partners for the Americas, said CDW will be forbidden to sell into any tier-one or tier-two HP enterprise accounts and will be restricted to the SMB market, he said. In addition, CDW can't sell the HP 9000 into accounts already served by other HP solution providers.What's more, CDW would be required to have the same technical and sales certifications as other HP enterprise solution providers, Vertrees said. "CDW will be an extension and reach of HP to penetrate new business in the SMB marketplace," he said. "It is CDW's and HP's intent to compete on value and not price."

In addition to HP, CDW has sold four-way servers from Sun Microsystems for more than a year.

Jim Grass, senior director of sales at CDW, said, "We understand the SMB marketplace, and we will serve those customers of ours as they continue to grow and get into more complex solutions."

CDW plans to pass off installation and other services opportunities to third-party partners, Grass said. Agilysys' ESG will get the bulk of leads, but CDW will use other companies depending on the geography and scope of the work, he said.

Some leads from CDW might flow to KeyLink Systems resellers, in addition to its ESG, said Patrick O'Connor, vice president of product marketing for HP worldwide at Agilysys. He dismissed charges that CDW and Agilysys would compete primarily on price. "It's truly a value-add sell."Still, other HP enterprise distribution partners are wary of the deal."[HP] keeps saying the concerns people have will not happen," said Jim Kleeman, general manager and vice president of Avnet's HP business unit. "We're all waiting to see how this affects the market place," he said.

But Michael Haley, vice president of the SBM division of Arrow Electronics, said, "CDW faces a stiff challenge selling enterprise-level products through its current business model. This is not a commodity sale," he said.

Joseph F. Kovar contributed to this story.

This article appears courtesy of CRN.

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