Oracle's Two Faces of the ChannelBy Jessica Davis | Posted 2007-11-05 Email Print
The database giant often shows two conflicting sides to its channel partners.
Even as Oracle trumpets its expanded and improved channel partner program in the weeks ahead of its OpenWorld Partner event, the company's percentage of indirect sales has actually declined by 5 percent over the past few years.
It's a tale of two Oracles. One has expanded programs for partners and hired partner-friendly executives. Another readily admits that the 5 percent decline is not a concern and the company is not looking to increase its percentage of indirect sales.
Doug Kennedy, senior vice president of alliances, admitted the decline during a recent interview with Channel Insider. One of the reasons Oracle is unconcerned is that total dollars coming from the channel have gone up, as have Oracle's total revenues. Channel sales just have not grown as quickly as direct sales.
Oracle's percentage of revenue from indirect sales fell from 45 percent in fiscal 2005 to 43 percent in fiscal 2006 and then to 40 percent in fiscal year 2007.
"We are fine with that 40 percent," he said. "Forty to 50 percent is where we'd like to be."
Kennedy said that Oracle's analysis of the decline in the percentage of sales from the channel revealed that much of it is due to the integration of the company's many acquisitions. Several of the acquired companies, he said, had weaker channel programs than Oracle, so integrating them has hurt Oracle's indirect percentage.
But at least one partner believes the strength of the acquired companies' partner programs has improved Oracle's own channel offering.
"The infusion of personnel from Oracle's acquisitions has helped the channel," said Bradley Brown, CEO and chief architect of TUSC, an Oracle Certified Advantage solution provider partner based in Chicago. "Many of those people are much more channel-oriented than the old guard at Oracle."
He also gives credit for Oracle's channel improvements to Rauline Ochs, a former channel executive at BEA Systems and IBM who joined Oracle in 2003.
"[She] is the force behind the improved channel," Brown said, adding that Ochs has received a lot of support for improving the channel from senior executives at Oracle. And Brown is not alone in his assessment of Och's influence.
Tiffani Bova, research director of IT channel sales, programs and alliances for Gartner, said Ochs has been "more embracing of the channel."
"Oracle is a different Oracle than it was in the past," Bova said. "It has taken awhile for [Hewlett-Packard] to build a solid channel program, and like HP, part of what Oracle has been doing is getting the infrastructure in place to support channel business, getting employees to support the channel business."
But not everyone agrees that Oracle has mended its channel-offending ways.
"It has never been a partner-friendly company," said Michael O'Neil, founder and CEO of Toronto-based analyst firm IT in Canada. "Oracle has been successful finding a strategy that values a direct-sales-driven culture and has taken out a lot of competitors by acquiring them."
Oracle currently employs a deal registration program to minimize channel conflict between the company's direct sales force and its partners, Kennedy said.
"Partners are still free to go ahead and compete," Kennedy said. "We look at whether it is a green field opportunity or whether it has been on Oracle's radar. If it is on Oracle's radar, we look at who is in the best position to close it in the most expeditious manner. And it depends on the situation. We are trying to lower overall cost of sales."
O'Neil said that companies that have traditionally followed a direct-sales model often have trouble converting to support a channel-friendly structure. It is coded into their DNA, he said.
"There's a feeling in some parts of the industry—not pointing a finger at Oracle or anyone else—that 'real men sell direct,'" he said, calling it a part of the corporate culture.
Oracle first made the 40 percent number public during a prerecorded Webcast with Kennedy and Ochs offered to media outlets on Oct. 29. Kennedy did not mention the decline in channel sales percentage at that time. During the Webcast Kennedy touted Oracle's channel statistics from the past year—Oracle now has 19,500 partners, a 10 percent increase year over year; did 103,500 transactions last year through the channel; and now has 9,100 ISVs, up 7 percent year over year.
Oracle also announced several improvements and expansions to its channel program during the recent Webcast.
Among them were training partners to the same level it trains internal sales staff, expanding its solutions catalog to include more than 4,600 partner profiles, a simplification of support pricing for partner development and demos, ISV solution maps to increase the visibility of partner products in the market, the Oracle Partner Network Competence Center, and plans to launch a social networking platform for partners to interact with each other.
As growth in the large enterprise market slows and midtier enterprises show the most promise for growth, Oracle has had to adjust its attitude toward the channel, which usually sells into those midsize businesses.
"Oracle at some point has to face up to a real challenge in dealing with the midmarket in how to expand beyond its big enterprise stronghold in the marketplace," said O'Neil. "Partners are important to that, but making products available for sale is different from selling them. Over time you win together and you lose together."
That's not an approach that Oracle has traditionally followed and is one the company still needs to learn, he said.
"Microsoft is not ideal in all circumstances but understands that it relies on the ability of its partners to structure its value propositions inside customer organizations," O'Neil said. "That's not something that is clear to companies that deal with direct-sales tactics."
Sharon Linsenbach also contributed to this article.