Eclipse of Reason: Sun's Channel MisstepBy Pedro Pereira | Posted 2007-04-27 Email Print
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Opinion: Sun's direct pricing debacle was a reckless move you wouldn't expect from a vendor with a solid channel track record.Sun's pricing debacle in April points to a weakness in the structural setup of a good number of IT vendors, even those commonly perceived as "channel friendly."
The weakness results from lack of communication between a vendor's channel-focused employees and those who work on the direct side of the business. Unless the vendor does 100 percent of its business through channel partners, chances are at some point direct and indirect sales and marketing people will butt heads or fail to communicate.
In Sun's case, it seems the company simply moved too fast in launching a 25th anniversary promotion giving direct buyers pricing so low that partners couldn't possibly have countered. The brain trust behind the promotion presumably rushed to make it public before running it by channel-focused people at Sun who might have derailed the ill-conceived pricing plan.
Communication is a challenge in any organization, and the challenge grows with the size of the organization.
Sun's misstep incensed partners, but it could have been worse. Since the promotion was made public online on the vendor's own Web site, it was easy to amend. To its credit, once aware of the partners' reaction, Sun moved quickly to minimize the promotion's potential harm to partners.
In a statement late Thursday, the vendor said it had added partner-friendly elements to the promotion.
"First, resellers can register deals that were generated by the reseller, but ended up being transacted via the Sun store; second, customers can indicate the partner they have been working with so that Sun can credit and compensate partners for this business; and third, partners with deals in process that meet the sale criteria, can register those deals," according to the statement.
These are good steps, though a better solution would have been to abort the promotion altogether. As it is, partners are still likely to run into situations in which this becomes a problem. If nothing else, they may have to spend an undue amount of time explaining it all to their customers and why it still makes sense to do the transaction through the partner.
At least Sun listened to partners' concerns and responded accordingly.
Ultimately, this is a case study on what not to do when you go looking for new business. Sun is expected to come up with ideas to generate more revenue, and it is justified in doing so. But Sun must take care when seeking new direct business that it doesn't end up cannibalizing its own channel. If you're simply shifting the seller, you are not ultimately getting new business, now are you?
Sun should also keep in mind price is not the only way to get new business. All vendors would do well to remember that.
Pedro Pereira is editor of eWEEK Strategic Partner and a contributing editor for The Channel Insider. He can be reached at email@example.com.