Sun Will Revise Channel Incentives

By Karen Schwartz  |  Print this article Print


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New approach will be designed to drive sales of broader range of products and reward midmarket sales.

After three years with relatively few changes to its partner programs, Sun Microsystems Inc. is set to overhaul its approach to the channel after spending months hashing out details with its National VAR Advisory Council.

Although executives insist that the changes don't constitute a complete overhaul of its partner programs, Sun is making some significant changes to put its channel program more in line with its new U.S. growth strategies, said Bill Cate, director of Sun's U.S. iForce partner office. Strategies include giving partners incentives to sell a greater variety of products and services to existing accounts; improving the mix of products Sun partners sell; and capturing new customers.

Sun's current channel program has a limited focus on where its partners sell, what they sell and how much they grow—something Sun executives want to change.

"Those are three areas that our programs don't measure extremely well today. Instead, [the current program] is more focused on two big elements—how much infrastructure do you have invested in Sun, and how much revenue are you bringing in," Cate said. "Those are important metrics, but if we're going to align with our U.S. growth strategy, we also want to reward partners on where they sell, what they sell and how much they grow."

The changes also will add a partner program level that better recognizes and rewards a group of partners that traditionally has fallen through the cracks—those that are selling a lot of Sun products but fall below those rewarded through the Putting Partners First program.

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"We don't want to change existing programs, but we want to take a broader reach into that next level of partners that are doing all of the right things but aren't quite fitting the participation criteria we laid out for the very top program's design," Cate said.

Although details are deliberately sketchy at this stage—the formal program won't be announced for at least two months—some things have become clear. Sun plans to reward its partners for selling a stronger mix of Sun products and services, and it intends to pay more for revenues and accounts in the midmarket space.

About half of Sun's channel revenue today comes from the highest level of dedicated accounts, while the other half comes from all of the accounts below that top 100—a segment Sun calls Portfolio accounts, consisting of 1,500 to 2,000 accounts. Below that level is what Sun calls Territory—the enterprise midmarket. It's at those two layers—Portfolio and Territory—where Sun plans to pay its partners more.

Although many changes will occur, Cate stressed that many of Sun's existing partner programs, especially its product-specific programs, won't change.

"We'll continue with programs like Software Elite, Storage Elite, our Solar Edge programs and our services program," he said. "We're just enhancing it and rewarding partners that have a stronger mix of Sun products."

However, Sun has informed its partners that the long-lived Sun Fund program, which provides co-op dollars for training, marketing, advertising and equipment, will be shuttered as of Oct. 1. Some VARs are concerned that Sun won't have a replacement program ready until Feb. 1, said John Murphy, co-president of Sun's National VAR Advisory Council and president of Advanced Systems Group Inc., a systems integrator based in Denver.

Others are hopeful that whatever replaces the Sun Fund program will actually be an improvement.

"I think Sun is headed toward an operational expense type disbursement of its funds instead of an accrual methodology, which would allow partners more liberal usage of the funds going forward," said Tom Kuni, co-president of Sun's National VAR Advisory Council and president of SSIhubcity, a solution provider based in Metuchen, N.J.

As for who will benefit, Kuni said he believes what Cate has said.

"Partners that are more in step with Sun's direction and want to sell Sun storage, software, services and servers are going to be in a better position to benefit from the next program than those that just selectively sell servers, for example," he said. "I think it's going to be Sun's way of feeding the eagles and starving the turkeys."

Sun plans to make the first details of the new channel program public in about two months, while adding more marketing program details and announcing new U.S. growth programs in the second quarter of 2006. The process continues in the third quarter of 2006, when Sun is slated to launch its new U.S. growth programs and launch new global partner programs.

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