Last year, 47 per cent of Oracle?s sales in the UK went through indirect channels. In the fiscal year to June 1997, the company expects the figure to be close to 60 per cent. As far as Vars, systems integrators, independent software vendors and other Oracle partners are concerned, this is a vast improvement on the situation four years ago when Oracle first introduced its Global Alliances programme. At that point, less than 10 per cent of business went through third-party channels.
So Oracle is now the Var?s friend ? but how good a friend is the question. Indirect sales are unlikely to grow any further in percentage terms beyond this year?s mark. It would not make sense to go further says Allen Swann, Oracle UK alliances director.
?You can get things out of kilter,? he says. ?Everything I?ve read says that the best way to maintain strong growth is to use a combination of direct and indirect ? to maintain growth through the direct route while giving resellers enough opportunities to develop their business.?
The argument is that for some large organisations, where the applications being developed are critical to the business, direct contact with the software suppliers is the only acceptable way of working.
Ian Bowles, UK alliances sales manager, backs Swann?s view. ?If someone like Barclays or British Airways is looking long-term at their IT strategy, they want to talk to the software authors and often they will want to be looking at the technology that?s in the labs not what?s available today, which is typically what the reseller will deliver.?
Not that what?s in the labs is hidden from resellers, he says. The European Oracle Developers Conference was staged in Paris in December last year for the first time, giving partners an insight into the company?s plans and new product developments. It will now be an annual event.
Previously, developers have been able to attend Oracle?s Open World in the US in October; the European event adds a new dimension to the relationship. Leaving aside the top companies, to which Oracle sells direct, there ought to be enough opportunity for many third parties. Meanwhile, the company?s direct sales to large organisations continue to increase the pervasiveness and credibility of the Oracle product.
In any case, from the reseller point of view, half the cake is better than none at all. And the way Oracle has built up its business, in the UK in particular, means Vars have an easier entry into Oracle?s space, says Swann.
?Traditionally, Oracle has been 100 per cent direct sales. When we set it up in the UK it was very focused on direct sales because our competitor in those days was Ingres, which traditionally worked through the channel.?
When Oracle entered the UK market in 1984, it felt that Ingres? weakness was support and direct contact with the user. The channel could not provide the level of back-up required for complex database applications development. By selling direct, Oracle could circumvent the problem and undermine Ingres? position.
Oracle felt that involving partners at this stage would have been pointless. Users were not demanding the product and resellers would not be easily persuaded to be active with it.
It was also necessary to get the market share before any real pull could be generated by the market. Once that market demand was there, Oracle could involve partners because there would be a compelling reason for them to get into the market.
But when the market started asking for Oracle, the company had a problem with the channel. ?We feel that what we did was right,? says Swann, ?but in doing that we didn?t make it easy for partners. In fact, we alienated them.?
For some time, resellers shunned Oracle as a company with a direct policy and, Swann admits, the company was to blame for a lot of the alienation. Internally, sales staff resisted the switch to indirect sales when it came just under four years ago.
Breaking down the internal attitude that for sales to be successful they must be direct sales, was difficult, says Swann. He ought to know ? he worked in direct sales for nearly 10 years before moving to global alliances in August 1995.
At first, Oracle tried to persuade salespeople to channel business through partners by offering them a 40 per cent uplift on their net invoice values through the channel. But that was deemed to be a little too much and last May the uplift was cut to 20 per cent ? salespeople with that much incentive could all too easily use the reseller as a fulfilment channel to get the extra percentage. That wasn?t the idea.
If Oracle does all the selling, Vars don?t bother to invest in skills. Oracle has gradually been trying to ease back from helping the resellers to make the sale so that the partners take more ownership of the account and Oracle saves on resources. That, after all, is part of the whole idea of having a channel ? reaching a wider market and reducing the cost of sale as volume rises.
Resellers therefore need to develop skills to win the business. The continued presence of the direct option is further incentive for development although territory managers are driven to sell through the channel.
Swann says Oracle has taken the responsibility of making this happen by, ever so gently, forcing the issue.
?The territory managers will bring the partner in and, in an ideal world, the partner is sufficiently invested in the product and able to exploit the opportunity to sell. There has been a bit of weaning process because, if you withdraw too quickly then you leave a gap, but our experience is that if you withdraw sufficiently, they will invest.
The 98-strong alliances team supports resellers in their marketing and technical activities. They are strongly driven by the partner?s activity as opposed to pure sales. Every year, alliances draws up a list of activities ? new business initiatives (NBIs) ? which it expects each type of partner to partake of or hit over the next 12 months. It is the alliances manager?s job to ensure their partners do these things and they are paid on achievement. But partners are not forced into any activity and the activities don?t have to be Oracle-only, says Bowles.
?We don?t force them into anything, but there is not a great deal of resistance to, for instance, running seminars. They don?t have to be Oracle-only and if we were trying to run seminars at a market they were not focused on, obviously there would be resistance.?
How do they know the NBIs work and the partners are not just going through the motions? ?We measure it by looking at how much new business that partner has done with us,? says Bowles. As with any marketing activity, Oracle can?t tell which of the activities is doing the trick. But NBIs at least set goals and a base level of standards. Most organisations, if they have to do something, try to do it well.
Schemes that resellers put forward, whether they are part of the alliance plan or not, are also considered by Oracle but there is no co-operative marketing fund.
Oscar Rook, alliances marketing manager, says Oracle has tried the co-op method and rejected it. ?Because people got it automatically, the scope of their marketing tended to be limited by the amount of money available. It was also regarded a ?free? service and therefore did not have the level of attention we?d like to have seen at the top level.?
By making grants from a fund to resellers that take an active role, Rook believes the money will be better spent and that schemes will be given more focus. It also gets away from the situation where resellers which have generated higher revenues get more money. Resellers with genuine ideas can get a hearing, regardless of their relative size or performance. The fund can be used for non-marketing activities as well ? technical or sales training for example, or development assistance.
Oracle?s communications have been undergoing something of a facelift of late. The company supports resellers with a comprehensive information service and this, says Rook, is very important.
?Partners need to understand what Oracle is all about ? our strategy, our products, the partner community as a whole, our services and so on. We?ve kicked off a monthly newsletter and invested in a partner Web site which gives details of the partners and their areas of expertise. It also allows them to access corporate information.?
Oracle?s online database contains 20Gb of information, says Rook, covering technical issues, business processes and product information. Partners also have access to a threaded email system so they can run global conference sessions.
There are sales targets as well, but they are not unrealistic, says Bowles. ?They have to be there otherwise you don?t know if the partnership is working for you.?
Behind the scenes at Oracle, there are plenty of people being driven to help partners hit their targets. As well as the direct sales territory managers and their uplifts, and the alliances people with their NBI targets, the income of Oracle?s partner alliance managers (Pams), is 80 per cent-based on the achievements of the partners. Pams draw the direct and indirect channels together to ensure the best channel is found for all concerned.
Pams draw deals from the direct team to the partner network and also ensure that the partners are treated fairly, says Allen. Pams are expected to ensure business is not stolen from Vars or from systems integrators, or that the direct team does not pull the rug from under their feet at the last minute
The Pam team was formed in June 1995 and has since proved very effective, says Bowles. UK indirect sales in Q1 of the current year were up 66 per cent on last year and he believes the Pams take a lot of credit for this improvement, especially in bringing new partners into the fold and getting them started.
It can be difficult arriving in an established channel where lines of demarcation are already drawn and a ?buddy? type network has already built up, says Allen. The Pams break the status quo by selling the merits of the new partners to the Oracle sales team.
When Vars start working with Oracle, they have the comfort of knowing that they have, at least, once friend in the business. In time, Oracle as a whole could become a very good friend indeed to many Vars.
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