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Oracle stacks the Exadata deck with Exastack, VAR rebates

For big software companies these days, it’s about stacks.

The latest is Oracle Exastack. This is Oracle’s effort to get third-party software vendors to optimize their applications to run on Oracle’s Exadata and Exalogic data center appliances. Oracle, trying to juice Exadata and Exalogic hardware sales,

ISVs can use Oracle’s best practices and guidelines to certify their apps as Exastack ready or Exastack optimized. Fifty ISVs are in the beta program, said Judson Altoff, the senior vice president in charge of Oracle’s worldwide channels and alliances. Oracle expects to showcase their best work at the upcoming Oracle OpenWorld 2011 next fall.

More important to Oracle’s VARs and VADs is the company’s decision — based on “popular demand”  —  to separate out the rebate programs between distributors and VARs.

In the past, Oracle paid  out back-end rebates to the VADs, they’d take their chunk and pass the rest on to the affiliated VAR. “When times were good, people behaved well and shared. When times were bad, not so much,” Althoff said.

Now there are discrete rebates to be paid out starting at dollar one to both parties. “There is no bogie to hit. And you’ll know at each deal if you’re eligible for a rebate,” he noted.

VARs can sell into Oracle’s “Global 2000” top accounts–which are cordoned off for direct sales attention–but will not get that back-end money. “It’s not a hard deck per se, but if they refill/resell [product] whatever they make in front-end margins is all they’ll make there,” Althoff said.

There is additional rebate money available to those VARs who sell designated “strategic products.” That list will be tweaked every six months or so.  The current hit list includes all SPARC servers, all T-Series servers, ZFS storage and tape products.

That makes sense, given that Oracle hardware sales flagged, falling 6% in the fourth quarter compared to the year-ago number.

Althoff acknowledged that there has been attrition in the Sun hardware channel since Oracle completed its Sun Microsystems buyout in January 2010 but maintained that Oracle is happy with the partners it retained. The thinking is that the company got rid of the dead wood.

“When we started the fiscal year, we were clear that we were changing the go-to-market substantially and that [the VARs] had to focus on companies outside our top account base which would go more direct. If we look outside those top accounts, we actually grew that [hardware] business–it’s larger today than before. The VARs that got that message and worked with us to transform their business outside those big accounts did well.”

“Did we lose some VARs living off fulfillment in high-end accounts? Yup. Did we lose VARs doing single-digit margin in server sales? Yup.”

Indeed, several large Sun hardware VARs have disappeared altogether. Others that kept their certifications continue to offer Sun hardware but have also picked up IBM or HP or Dell servers as a hedge. Off the record, several executives at those latter VARs said they no longer lead with Sun hardware because they see the writing on the wall.

For Oracle’s part, it prefers not to focus on hardware or software VARs but systems or solutions VARs. Their marching orders are to sell the aforementioned stack into net-new accounts.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at

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