In a move that HP’s North American 3000 distributor said was “an absolute necessity to get done,” HP and Client Systems reduced the number of US HP 3000 hardware resellers by two-thirds during May and June.

Client Systems Vice President and General Manager Mike Murphy said that his company worked in cooperation with HP to “de-authorize” 23 hardware resellers from the HP e3000 channel in the US. No Independent Software Vendors (ISVs) authorized to sell new e3000s were de-authorized in what Murphy called a “rationalization of the channel.”

“I see no downside to this,” he said of reducing the e3000 US channel to a total of 41 outlets, including nationwide hardware resellers Forsythe Solutions and Logical, 11 regional resellers, and 28 ISVs. “Two thirds of the hardware resellers are no longer participating. They really weren’t in the business anyway.”

One e3000 channel observer said fewer HP 3000 resellers working more closely with customers could be better for the platform. Birket Foster, president of M.B. Foster Associates and head of the Special Interest Group for HP 3000 software vendors, said HP wants resellers to think beyond price.

“They wanted to eliminate people who thought price was their value added,” Foster said. “Your real value added should be the customer relationship. For those people who wish to invest in customer relationships, this is a great deal. You can’t get business forever just on price.”

Foster thought winnowing resellers would let those remaining “spend a little more time with their customers, and watch what the customers are doing.”

HP and Client Systems began the rationalization by setting a $500,000 hardware sales minimum that resellers needed to report for the prior year. It then also evaluated other factors such as whether the reseller had a special niche market and its past performance. Murphy said some resellers chose to walk away from their authorization to sell new HP e3000s.

“Some of those made their own business decision not to continue to participate,” Murphy said. “They clearly understood they weren’t being effective and it was very opportunistic for them. They really wanted to do more of a partnership with other resellers who were more into the 3000.”

Murphy feels like the rationalization leaves the market with the best of the channel. “I’m thoroughly impressed with the resellers that are continuing to be part of the channel,” he said, “in the attitude they have displayed, and the immediate and positive impact in the first 30 days.” Sales are up over that period, he added.

Some cuts were made on the basis of sales performance. “[They] were cut for not being able to produce an acceptable level of output over the course of a few years,” Murphy said. “It was no surprise to those guys. Most of those only sold a drive or two a year. The remainder were encouraged to go through an RFP process to bring them every opportunity to justify why they would be a valued reseller partner.”

Murphy said the majority of the resellers who were de-authorized came from “those that didn’t meet a bar, and those who made the decision not to participate. The RFP process didn’t cut that many of the resellers.”

The RFP survey asked a reseller to describe “a detailed plan as to how they were set up and planned to go out and provide a high quality level of customer service. We wanted them to show they were taking care of the customer.” The RFP asked about a reseller’s sales organization structure, technical certification, regional and local offices, marketing plans and desired geographical boundaries.

Murphy said while many customers are satisfied with the channel, others were not.

“Quite frankly, there were still a large number of customers who felt their needs weren’t being met,” he said. “We discovered the channel had become a very opportunistic channel. There was no real passion to go out, identify opportunities and understand what customers’ needs were.”

“We wanted to take it to the next level,” Murphy added. “We felt a smaller, more concentrated, committed and focused channel would be much more effective. There’s more than sufficient coverage to take care of the installed base. There’s still a lot of e3000 resellers out there operating and servicing customers.”

Murphy said that most of the remaining resellers have expanded territories, as well as increased visibility from both HP and Client Systems. Cutting back on the number of resellers it must service lets Client Systems “allocate our resources more effectively.”

“There are now funds available that can be utilized in a smaller, more concentrated group,” he said. “Instead of dividing [your dollars] by 50, you can now divide it by 12. We can do a lot more, more niche-type focus with the reseller. I’m not saying we will, but we have that opportunity.”

Some hardware resellers who have been de-authorized have partnerships with those who made the cut, Murphy said. “They know the right thing to do is take care of their customers,” he said. “We’re trying to make that happen as much as we can.” Resellers will also have to get more aggressive to introduce themselves to 3000 sites, he added.

“It’s a great opportunity to create a new channel,” Murphy said.