The indirect road to Sybase's Damascus

In the driving seat, or off its trolley? Only time will tell ifSybase's move to the channel was a wise one

A return to operating profit prompts many questions about the Sybase strategy. Its switch to an indirect model may seem like St Paul's conversion on the road to Damascus, but there are solid business reasons why the company has made the change.

Although it joins a long list of vendors that have suddenly discovered the advantages of having a channel rather than selling direct, the move is likely to prove an uphill struggle. Mitchell Kertzmann, CEO of the company, toppled Mark Hoffman in a boardroom coup earlier this year, and the fact Sybase shows signs of turning round does paint a picture of some disarray in the boardroom.

The results show turnover up to $250.2 million for its Q3, but the figures include an operating charge of nearly $50 million. If you are a clever financial player, you can subtract a restructuring charge of $52.6 million and demonstrate to Wall Street and major Sybase users, that you are in the black.

European VP Pierre Violo was charged with putting 40 per cent of Sybase's business through an indirect model by the end of next year. He will change incentive schemes for its sales staff to compensate them for pushing business indirectly. He agrees the company will need to persuade resellers that it is serious.

But Allan Swann, alliances director at Oracle UK, thinks Sybase has left it late. Two years ago, Oracle sold almost completely direct and Swann admits it has taken that long to make the relationships work. 'They could achieve their 40 per cent objectives, but partners want to see growth.

It's no good being 40 per cent of a stagnant pond.'

One problem is Sybase and Powersoft had different business models before they merged. Colin Tenwick, MD of Sybase UK, came from Powersoft, as did Kertzmann. There always was an internal conflict between the direct and indirect models to resolve after the merger.

Kertzman is pragmatic. He told analysts earlier this week that as he had a large shareholding from the earlier merger, it was in his interests to turn the firm around. Nor will he sell Sybase, he insisted. Despite the rumours and poor results which pulled the share price down to an attractive proposition in the last quarter, he said: 'No one will take us in a hostile way.'