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

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.