Sun VARs to Oracle: You need us!

For Oracle to become a hardware power, it needs a viable channel, at least according to channel people.

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At least a few Sun VARs came out of last week's Oracle OpenWorld 2010 hardware sales pitch feeling a bit better about life under the new Oracle regime.

Mike Davis, CEO of Applied Computer Solutions, Huntington Beach, Calif., said Oracle executives at the San Francisco event were very receptive to partner concerns.

Others hold out hope that new Oracle Corp. co-president Mark Hurd will bring HP's more channel-friendly mentality up the street to Oracle.

"I think Hurd was a good hire," said Dan Mori, executive vice president of San Francisco-based FusionStorm, a hosting and reselling partner of both Sun and Oracle.

Indeed, many hardware partners agreed that Hurd brings two things to the table that Oracle sorely needs: channel savvy and hardware experience.

Thus far, the Sun hardware channel has been rattled by changes imposed by new ownership. VARs like Davis are getting used to dealing with a software company with a decidedly direct-sales focus.

The question for Sun hardware VARs is whether there is enough services opportunity to make up for lost revenue from product sales -- and whether the services revenue can offset the high cost of specializing in Oracle technologies.

In any case, many Sun VARs are not ready to concede hardware sales entirely.

Does hardware market share matter?

By most accounts — Sun hardware has bled market share for quite some time. For the second quarter of this year, Sun server revenue fell nearly 11% and units sold fell a whopping 26%, according to Gartner Inc.

But Oracle seems willing to sacrifice raw numbers for profitability.

Both Oracle CEO Larry Ellison and co-president Safra Catz have said Oracle will focus on high-end, high-margin hardware and cede the low-end, commodity market to Dell, Hewlett-Packard and others.

In a private meeting with select Sun and Oracle VARs in Colorado last month, a Sun channel executive said Oracle "expects" to lose a quarter of its existing Sun hardware base.

Meanwhile, Ellison again said the company is hiring 2,000 more sales personnel, including sales engineers. Whether that's enough is up for debate.

"One thing I never heard anything about last week was [hardware] market share," said Davis. "I think to get the penetration [Oracle needs], they will have to hire 4,000 to 10,000 sales reps.… In the short term, they can't accomplish that fast enough. In the long term, they're smart people, they'll figure out the cost of sales and then will put more hardware through the channel, including Exadata," Davis noted. Exadata is the million-dollar server optimized for data warehousing and online transaction processing announced last year.

Many Sun VARs had big questions coming into Oracle OpenWorld and were prepped for the worst.

They'd already been told that all but a handful will lose the Sun hardware renewal business to Oracle starting next month. For some Sun VARs, renewals constitute 15% to 20% of their business. And they already knew that support and maintenance would also go direct after the first year of an account.

Other Sun VARs are recommending servers from rival vendors while still craving a piece of the high-end Exadata and upcoming Exalogic business.

Oracle VARs used to the company's model -- under which net-new sales can go to channel partners, but subsequent renewals flow direct, said the hardware VARs must face reality.

"They just need to grow up," said Wade Nicolas, president of Enkitec, an Oracle partner based in Irving, Texas.

Will Exadata/Exalogic sell?

There is some customer interest in Exadata and Exalogic. People want to know about them but not necessarily buy them. The hardware-only cost for a one-rack system is just over $1 million – and that's a very different sale than the old Oracle pitch that customers should run its databases on a free Linux OS and cheap servers.

New customers tend to view Oracle with caution.

"They're a bit reserved about dealing with Oracle, especially if they're running Linux and non-Oracle databases. They're afraid of engaging with Oracle because of its reputation," said another Sun partner.

"As [former Sun CEO] Scott McNealy used to say, it's not the cost of entry, it's the cost of exit. And with Oracle that cost of exit is very, very high," said another West Coast partner.

Many Oracle database shops hate that they have become a captive audience but few are willing to chance moving core corporate functions to a new database or financial applications.

"In the old days, you were never fired for buying IBM. Now you're never fired for buying Oracle," Davis said.

The former CEO of a West Coast data center company said Oracle's appliance approach could drive Sun hardware sales. If Oracle makes the database a part of an appliance so that's the only way people can buy it, they'll buy it, he said.

And many say that customers aren't lining up to buy pricey data center appliances like Exadata or Exalogic -- either direct or through channels--simply because the machines are too new and too pricey. And they would put too much of a data center's compute power in the hands of one vendor..

"We don't hear customers demanding converged hardware. And for our part, we don't care if it's a chipmunk in a cage as long as it performs," said Sean Harmon, vice president of sales for TriCore Solutions LLC, an Oracle partner.

Those with long memories point to Ellison's failed crusade to push the Network Computer as one reason he should stick with software.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com, or follow us on twitter.

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