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By | Dan Olds, Gabriel Consulting 5th February 2010 12:06

Oracle puts the squeeze on Sun channel

'The right call'

Comment Oracle has come out with a firm message regarding Sun’s sales strategy: it will change.

In 2008, a flailing Sun announced it would service its top 300 accounts directly and push the rest to the channel. We thought it was a terrible idea at the time, and at analyst conferences, we questioned company management about it.

The answers were various flavors of “Everyone else is doing it” and “This will make the channel love us like a junior high school girl with her first boy-band crush.” That last quote might not be verbatim; our notes have faded a bit over time.

Our counterargument was based on the fact that Sun didn’t have nearly as robust or loyal partner relationships as did (and do) IBM and HP. We thought that this move was perhaps half -strategic initiative, half an opportunity to blow out large chunks of their field organization in an attempt to cut costs. Regardless of the motivation, the results speak for themselves – Sun did not pull out of its revenue spiral, and it ended up in the arms of Oracle. (Arms? Claws? Tentacles? You make the call.)

During the call last week, we heard two different numbers from Oracle concerning the number of accounts that it will handle directly. Phillips said 1,700; Larry talked about 4,000. We’re betting on a number somewhere in the middle.

Reps R US

To get coverage, Oracle plans to hire 2,000 sales reps immediately, and it put out a call during the webcast for good salespeople to come running. Of course, many of these folks will be former Sun people who either left the company under their own power or were shown the door (and told to walk through it) in recent years. Given that Oracle is promising that its system sales folks will be the best paid in the industry, it’s probable that they will need an Exadata system of their own just to handle and sort the resumes.

We think moving back to a more direct model is the right call, given Oracle’s emphasis on selling business-critical x86 and SPARC systems. Going indirect on mission-critical servers running a complex set of workloads can be a problem; customers who are buying a ‘bet-the-farm’ box expect to get the absolute highest priority service possible.

In their minds, this doesn’t come from a reseller or a VAR; it comes from the manufacturer. There certainly are a lot of VARs and resellers who can service these customers, but there are also some who are primarily box movers who won’t take the time to fully develop a lead or pursue a complex solution.

One of Sun’s problems on the sales side was that it had a much lower proportion of partners who sold only Sun gear vs. their major competitors. IBM and HP have done a much better job at building a partner population that is loyal to them long-term.

It has also paid a lot of attention to filling out its product portfolio and adjusting partner comp plans to ensure maximum branded content in any given deal. Sun didn’t have as comprehensive a product set or much control over partners, so when it moved those accounts to the channel, it opened them up to more competition. The company also forfeited their direct relationship with many of these customers in the process.

Partial dump

Oracle is not dumping the channel entirely, of course. It stated many times that it's more than happy to work with channel partners who “add value” to enterprise deals. This value would be along the lines of having a unique skill set in a vertical industry or a unique bundle that complements the Oracle/Sun offering. It also said that it will use the channel to service mid-market and smaller customers.

Right now, roughly 80 per cent of all Oracle transactions and 40 per cent of sales revenue flow through partners. However, we can probably expect to see a bit of a channel revolt against the New Oracle. Even in the best of times, Oracle hasn’t been regarded as particularly channel-centric. Now, with Oracle taking accounts out of play, there are probably going to be repercussions. How great an effect this will have on actual sales is, hard to say.

This new Sun sales force isn’t just going to be bigger by 2,000 folks; it will be more specialized, with dedicated server reps, tape reps, and storage reps. When it comes to servers, most multi-line channel partners are happy to install whatever box makes for the easiest sale to the customer. They typically won’t make a stand on a particular brand unless they don’t have a choice… like when another partner is selling against them with the same hardware, for example.

In past years, I’ve heard from competing systems vendors that they’ve been seeing less and less of Sun in competition for deals. IBM encounters HP in every deal; HP sees IBM in every deal; they both see Dell in quite a few x86 deals. But they don’t see Sun unless Sun is a strong incumbent. Sun’s move to an indirect sales strategy didn’t help this situation; it probably made it worse.

This makes Oracle’s main job on the sales side to get adequate coverage, and get the Sun solutions in front of buyers. Given what they said last week, Oracle looks to be grabbing this particular bull by the horns, wrestling it to the ground, giving it a briefcase full of thumb drives loaded with product pitches and PO forms, and unleashing it upon the enterprise computer-buying public at large. That should shake things up a bit.

Dan Olds is an Enterprise IT analyst, based in Oregon. He is also The Register's resident HPC analyst. You can read his HPC blog here.

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