Wisdom behind the Oracle-Sun merger
Oracle and its partners open up about the Sun acquisition's impact on the channel. Caroline Donnelly reports
Of all the acquisitions to have taken place in the storage channel over the past 18 months, Oracle's $7.44bn (£4.5bn) buyout of Sun is one of the most contentious. The deal was completed in January 2010, and Oracle has incurred the wrath of the storage vendor's partners on more than one occasion since then.
Within days of the deal's completion, the software giant declared that it would be taking 4,000 of Sun's largest accounts direct.
Last August, it went on to axe two of Sun's long-standing UK distributors - Interface Solutions and Computer 2000 - and faced claims months later that the merger was prompting some VARs to jump ship.
Corporate VAR Computacenter has held top-level accreditations with both Oracle and Sun for many years. Neill Burton, datacentre solutions director at Computacenter, says the distribution changes were felt keenly further down the supply chain.
"We had some problems on the logistics side, getting hold of products where and when we needed them," Burton says. "But we are a big enough organisation to work through these kinds of challenges, our customers were very sympathetic, and the situation has improved."
Stein Surlien, senior vice president of EMEA alliances and channels at Oracle, admits the deal led to some partners leaving the fold, but says that is a common outcome whenever two large vendors merge.
"There will always be partners who decide they would like to do something else," he explains. "At the same time, it might be our decision to say we need fewer partners [in certain areas] because the products are over-distributed and the margins are killed."
He stresses that there was an "open and constructive dialogue" between Oracle and its partners during this time, but concedes the transition was not easy for all. "We had to change the [Sun] business model because it was not making money," says Surlein.
"And in that process, there was some pain, but we have put that behind us now and we are building a strong
foundation."
Clive Longbottom, service director at analyst Quocirca, agrees that the Sun channel was in disarray prior to the acquisition.
"Sun's channel had got into a complete mess and needed weeding out," he claims. "However, some of its partners have been very worried by some of Oracle's moves."
It is a fact that has not gone unnoticed by the likes of HP, IBM and Dell, he says, who have all made attempts to court disenfranchised Sun partners.
"This is where Larry Ellison's known aversion to the channel may count against them - and where Mark Hurd's channel knowledge may stand the company in good stead," says Longbottom. "It will be interesting to see which philosophy wins through, and how much of the Sun channel will remain in the end."
With the integration complete, Surlien says the firm's focus is now on forging closer ties with partners by encouraging them to get involved with its specialisation programme.
The programme features 60 specialisations spanning the vendor's 9,000-strong product portfolio, which are geared towards driving sales in four areas: database, systems and storage, middleware, and applications.
Sealing the deal
At the moment, about 100 partners a week are going through the specialisation process and are rewarded with a greater level of investment from the vendor, claims Surlien.
"Specialisation is not something that partners can achieve overnight, because it takes time for them to work out what their uniqueness is, where they want to play, and how they are going to invest in Oracle to achieve that," he says.
"We get millions of dollars to spend on our partners to develop their businesses and provide them with market development funds, and 80 per cent of that is spent on partners who specialise and have demonstrated their commitment to Oracle."
Computacenter's Burton claims the firm is a staunch supporter of the programme and is now securing its eighth accreditation.
"The specialisation criteria are difficult to achieve, but it is a much more logical way, considering the size of the Oracle channel and its product portfolio, to categorise partners," he says.
Burton adds that obtaining a specialisation is tough, as it tests partners' sales and technical skills, and requires at least two customer references.
"Asking for references is a great idea because it sets apart partners who can do what they say they can from those more concerned with how many vendor badges they have," he says.
"It requires a lot of investment from both a money and a time point of view, and that means partners have to think very carefully about where they choose to place their bets."
Burton maintains that the accreditations have given Computacenter more credibility in the market, and he applauds Oracle's work in showing end users what they mean.
"I am not seeing customers beating a path to our door because we have these specialisations, but it is all relatively new and I think that it will come in time," he says.
"But I am not sure how much is being done in terms of getting Oracle's own sales force to promote partners with expertise in particular areas."
Distribution decisions
Avnet and Arrow ECS emerged as the victors during Oracle's UK distribution cull last year, and have been helping partners get to grips with the programme.
Surlien says: "We have a ‘train the trainer' concept in place with our VADs where they school their VARs in the hardware and software side of what we do."
Gary Coburn, senior vice president of Avnet EMEA, says that the company has seen a lot of interest from Sun VARs in Oracle's software products.
"Since the merger, Avnet has been able to support hardware partners in acquiring software specialisations and software partners in hardware ones," he says. "This has significantly accelerated the time to market for partners offering combined solutions."
Coburn says Oracle's decision to bundle hardware and software after the merger has been warmly received by partners.
"Bundled solutions of hardware and software such as Exadata and Exalogics make compelling offerings for the channel, which can add a range of implementation services to create a complete customer solution with full support from Oracle," he explains.
Oracle's Surlien insists that everything Oracle has done has been embarked upon with a clear goal in mind. "We have a clear mission," he says. "We want to increase the profitability of our partners by building a strong ecosystem to support solutions sales.
"Our business model has always been about delivering high value and quality, and that is reflected in our partners' margins because customers are willing to pay more when they see great value."
A short history of the Sun-Oracle acquisition
The close of the Oracle-Sun deal in January 2010 marked the end of more than nine months of debate over the legality of the merger under competition guidelines. The US Department of Justice was the first to give the deal the go-ahead in August 2009, after it ruled that the software giant's ownership of Sun's Java platform would not breach anti-trust laws.
Fears had initially been raised that the deal would lead to Oracle having a monopoly on the world's web-based networking software market, thanks in no small part to the widespread use of the Java platform in mobile devices, servers, and supercomputers across the globe.
Winning the approval of the EU Commission (EC) was seen as the last major obstacle in Oracle's bid to acquire Sun, after the EC launched an investigation into the impact the merger could have on the IT sector's competitive landscape.
A major area of focus was the database market, where Oracle's stronghold would almost certainly be bolstered by adding Sun's open-source database offering, MySQL, to its portfolio.
The investigation lasted several months, but the EC ruled in Oracle's favour in January 2010 and the deal closed shortly thereafter.
Service players feel Oracle heatwww.channelweb.co.uk/2033754