Avnet Responds to Oracle's Move to Take More Business Direct

By Jessica Davis  |  Print this article Print


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Distribution giant Avnet admits there was some initial concern about Oracle CEO Larry Ellison's recent comments about taking more business direct. But Avnet Technology Solutions President Phil Gallagher tells Channel Insider that dialogue with the software giant points to opportunity ahead.

With Oracle closing its acquisition of Sun Microsystems and announcing that it will take 4,000 of Sun's customers direct, what's the fallout for resellers and for distribution?

There was initially some concern at Avnet's Technology Solutions, President Phil Gallagher admits, but he tells Channel Insider that the distribution giant expects no material business impact.

"Although the initial news was of concern, we will look at how this challenge will become an opportunity for us," Gallagher tells Channel Insider. "We are in daily contact with them and have had some positive dialogue."

Oracle CEO Larry Ellison didn't pull any punches at Oracle's Oracle/Sun integration event and news conference Jan. 27.

"If you are just a distributor of a product, like a store, then at that point we think we are better off going [directly] to the customer," Ellison said. "We'd be foolish to bypass our value-added partners in the services or technology space. Be foolish to even try because customers wouldn't let us."

But Gallagher says he believes that Avnet's value distribution focus and services will be a strength for the distributor.

Further, he points out that from a value distribution standpoint, Avnet is one of two distributors Oracle works with, and the only one it works with in Asia. Plus, Oracle's focus on certain elements of distribution is unwavering.

"Oracle is still committed to value distribution," Gallagher says. "They are interested in solutions distribution. They are committed to driving a two-tier channel strategy."

At the Jan. 27 event Ellison said, "We need to do a better job of delivering it directly—directly—to customers and [to] get it installed properly. Where Sun sold primarily through partners, we are now going to take the top 4,000 Sun customers and sell direct to them. We know the technology is great, but we have to transfer that to our customers. If we do that, they'll buy more."

However, Avnet CEO Roy Vallee pointed out to analysts during the company's recent earnings call that the changes at Oracle have a potential upside for Avnet.

"No longer will they deal directly with resellers; all will be required to buy from distributors, and on a global level they are looking to consolidate the number of distributors they work with," Vallee said.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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