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Oracle puts the squeeze on Sun channel

'The right call'

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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.

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