Vendors Improve Financial Offerings for VARs

Vendors such as HP and IBM are making moves to help VARs maintain their cash flow, notes Managing Editor Al Senia. It's a smart move to strengthen channel relationships and boost business.

February 6, 2009

Al Senia

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Economic stimulus or not, money remains tight in most places, including the VAR channel. Maintaining adequate capital is a challenge for IT VARs, as it is for many other small and medium businesses throughout the United States. Thankfully, channel vendors are recognizing this problem and are moving aggressively to lend a hand.

Just a short while ago HP made changes to its PartnerONE program, providing back-end compensation to Preferred- and Elite-level channel partners for certain hardware deals and consulting services. (The program is modeled after one for resellers of HP enterprise hardware.)  Earlier, HP worked on a major revamp to PartnerONE and simplified its channel program.

Company officials say they want to help partners develop their business plans more effectively with HP and better serve customers. By being able to determine the rebates they'll receive from HP at the beginning of the sales cycle, channel partners should gain a competitive edge and close more deals. Or at least, that's the theory.

That sort of action makes a lot of sense. It doesn't cost vendors a whole lot of money, but it strengthens channel relationships and throws a financial lifeline to the VAR. It should help stimulate new business. (More detailed information is available at HP's Partner Portal.) It certainly can't hurt in the present business environment.

Creative Financing

HP also borrowed a page from beleaguered U.S. automakers. The company, through its HP Financial Services division, recently established an interest-free, 12-month purchasing option for small and medium sized business customers, the sweet spot for many VARs. There's also a 36-month leasing option for business customers.

It's probably a whole lot easier to sell IT equipment than a new car these days, but it's still a good idea to help SMB customers out because it's the smaller business that's really hurting right now. And by extending credit for a year and leasing arrangements for three years, HP is going to help VARs make a better case for the return-on-investment in those technology sales. The financing program certainly seems like it will work well with those PartnerONE revisions.

HP isn't the only vendor taking such action, of course. IBM has made similar changes. The company recently simplified its incentive process to get funds back in the hands of channel partners much faster. Channel executives say they recognized that cash flow is a critical issue for IBM Business Partners, who used to have to meet specific sales targets before getting their rebates. Now those rebates will flow right from the first deal. Now the money comes back a lot quicker.

IBM also has identified sales opportunities in the midmarket and 20 emerging international markets and has pledged to work more closely and efficiently with Business Partners to close deals in those markets. Company officials pledge to drive more business through the channel.

Other vendors such as Microsoft are also said to be working on revising financial incentives for their channel partners. In fact, we are likely to see a lot more of this if general financial conditions don't ease up soon. Vendors are looking out and seeing that financial spending forecasts look gloomy, at least in the short term. They seek ways to stimulate sales. Bolstering partners is one way to accomplish this. It's also true that collaborative approaches tend to be more successful in challenging markets because both vendors and resellers are more likely to cast aside their inherent distrust and partner up for whatever business is out there. Finally, such changes are a good way for vendors to differentiate their own partner programs and attract more VARs, more boots on the ground, so to speak, for their product lines.

All of this makes for at least a bit of a silver lining in the current gloomy economic landscape.

(Al Senia is managing editor of ITChannelPlanet.com.)



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