Oracle vs. SAP: The Tale of Two Channels

Oracle and SAP may be archrivals in the business applications business, but they have toed very similar lines — and reputations — when it has come to the channel over the years. Both companies are built upon legacy enterprise heritages served by massive – and massively aggressive — direct sales forces. Both have been knocked as decidedly channel-unfriendly; Oracle for its tendency to inflict conflict and competition on partners in the field, SAP for demonstrating a fair amount of cluelessness about the benefits of an indirect channel in the first place.

That’s why it’s so interesting to see how these two stalwarts of the industry are approaching the channel today. Following a period in which both declared that the channel was integral to their respective success, especially in the SMB market, Oracle and SAP today are choosing different paths.

Oracle, for its part, could not be more overt in its direct sales intentions. While not cutting out the channel entirely, the message at last week’s event heralding the closing of the Sun Microsystems’ acquisition was clear: Strategic deals and thousands of top customers — including 4,000 of Sun’s top accounts, alone — are best left in Oracle’s capable hands.

Straight from the mouth of Oracle CEO Larry Ellison on how he intends to handle Sun’s go to market from here on out:

“Sun has a fabulous installed base of customers and pipeline of technology. We need to do a better job of delivering it directly—directly—to customers and 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."

Sounds like Ellison’s got some trust and competence issues with his channel. And while he’s ceding the midmarket – 31,000 other accounts, by his number – to the combined Oracle-Sun channel, he didn’t say much last week to that sounded all that motivating and supportive if your one of those partners. To its credit, however, Oracle has revamped its partner program to zero in on specializations, which should help partners land bigger, more lucrative solutions-focused deals. But it also requires a deeper investment in Oracle in terms of training and resources.

What will be interesting to watch is how Sun’s hardware-focused channel can retrofit its business model to accommodate specializations at the midmarket customer level. Many of Sun’s partners today sell high-end systems to those same larger-sized accounts that Ellison is taking direct.

On the surface, the SAP go-to-market approach isn’t radically different from Oracle’s: The company maintains a strong direct sales team that focuses its efforts on the largest enterprise customers while having slowly but surely cultivated a modest-sized channel to try to capture midmarket revenue that in the past has eluded them.

The difference, however, has a lot to do with the tone SAP has struck toward its channel and its stated goal to broaden – not shrink — the opportunity for partners going forward. You get a sense they mean business in other words.

The company is hiring seasoned channel executives, such as former HP channel chief Kevin Gilroy, to jumpstart initiatives in North America and raised the size of the deals in which its channel can participate from $300 million to $500 million. That’s not small potatoes. Rather than being locked out of the enterprise completely, SAP partners are being welcomed in.

At the end of the day, SAP executives say they want 100 percent of SME revenue – deals $500 million and below – to flow through its indirect channel. That’s a major turnabout for the company and belies a trust in its partner ecosystem that Oracle doesn’t have in its own.