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Oracle partners say channel conflict is on the rise

Oracle has new channel chiefs in place after high-level departures, but partners say they see increased channel conflict in the field.

Oracle Corp. has new channel chiefs in place now, but partners say the recent departures of Rauline Ochs and Doug Kennedy and burgeoning channel conflict cast a shadow over the vendor's partner strategy.

A half dozen partners told that conflict with Oracle's direct sales force has increased in the past year. "Every day is a struggle, and it's getting worse," said one large Oracle technology partner on the West Coast.

A Midwestern partner said it is unclear to him if Rauline Ochs, who was senior vice president of North American alliances and channels, left Oracle early this year because "her work there was done, or she was done" at the company.

"With Rauline, at least we saw a change and there was always a discussion of the next level of change," said the reseller and implementation partner. "Now there's nothing and no guidance, no 'This is what we're trying to do.'"

Ochs' replacements, group vice presidents Tyler Prince (who will handle applications) and John Gray (who will handle technology) will host a partner call Tuesday morning, according to partner sources. (In Oracle parlance, "technology" means the database, tools and application servers business, while "applications" include E-Business Suite and the various Siebel, PeopleSoft and JD Edwards products.)

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A California-based partner said bad Oracle sales behavior, which had been on the decline, "has started to rear its ugly head" again in the past few months.

The fact that Doug Kennedy, Oracle's senior vice president of worldwide alliances and channels, left for Microsoft just months after Ochs exited may not affect U.S. partners directly, but "the perception to the outside world is not good," this partner said. "The two top channel people have left, and it took Oracle too long to name Rauline's successor."

The Midwestern partner said what he has seen since Ochs' January departure is Oracle reps "figuring out ways that fall within the rules of engagement to get as much money out of each deal as they possibly can."

"I'm not sure they want to cut out the channel, but these [regional managers] want to keep customer control and that often means cutting us out of deals," he added.

Do Oracle's direct sales roots make channel conflict inevitable?

Channel conflict is never far from the surface for companies like Oracle that are built on a very competitive direct sales focus.

Oracle's traditional strength is selling large and pricey databases into large companies. In recent years, it's tried to better penetrate smaller companies with both databases and applications. That push led to a more partner-friendly culture, at least at times.

Now, Oracle's multi-billion-dollar applications buying binge has introduced new tensions into partner relationships, several partners said.

In fact, that spending spree has brought some partners into the fold who are just beginning to figure out what Oracle's bare-knuckled sales culture means to them.

For example, Oracle bought Stellent Inc. for its content management expertise and Agile Software Corp. for product life cycle management. Both of those companies worked with a small number of value-added partners, which meant a high-margin sale.

"The bottom line is a lot of those [Stellent] guys are used to a more partner-friendly vendor organization," said one longtime Oracle partner. "Stellent liked partners to go in and do implementation work and sell licenses. The Stellent salesperson was always a support person, not the lead."

The Oracle culture, where inside reps don't like the back seat, came as a rude awakening to these relative newcomers.

"The first six months were fine. Then when the Oracle Tech group started to realize there was some real money to be made, they got actively involved and the rest is history," this partner said.

Oracle's All Partner Territory (APT) concept divides sales regions into geographic areas in which all sales into new companies with less than $100 million in revenue are supposed to flow through partners only. This seems to cut conflict in some territories but not in others. And the fact that APTs do not cover the entire country means that partners outside the APT geography will come in to compete with local partners to win business. That actually increases partner-vs.-partner conflict, this partner said.

Some Oracle partners had hoped that when Ochs and Kennedy left, the company would merge the North American and worldwide channel groups, following the lead of companies like 3Com and Cisco's Linksys division.

Mick Gallagher, CEO of LifeSci Technologies LLC, a Fallbrook, Calif., Oracle partner, said that move might have streamlined operations and reduced channel conflict. At Oracle, the North American channel chief reports to Keith Block, the executive vice president in charge of North American sales and consulting, whereas the worldwide channel chief reports directly to Oracle president Charles Phillips.

"I believe [such a move] would only strengthen Oracle channel positions in the regions, because then the regional people would have channel people reporting to them," Gallagher said. He explained that Oracle regional managers would then be willing to "take a more proactive stance for the channel."

"If companies like 3Com and Cisco have figured out this is the best approach, it seems like an industry trend," Gallagher said.

But since Oracle named Judson Althoff to Kennedy's post, it looks like such a merger won't happen, at least in the near future.

Splitting the turf: North American channels divided into technology and apps

The decision to split Ochs' job between Prince for applications and Gray for technology pleased at least one longtime Oracle partner, however. SCT partners with Oracle on the database and app server side of the house but competes on applications with its ERP solution for higher education. "We view the split in the channel leadership there positively," said Diane Ruth, general manager for business development for the Malvern, Penn.-based ISV.

Others said they'll have to evaluate how the split affects their business.

"With the recent changes in the channel landscape, it remains to be seen how things will shake out for partners. Hopefully, Oracle will continue on a partner-friendly path," said Dan Mori, vice president of FusionStorm, a San Francisco-based Oracle technology partner.

A partner in the Midwest said conflict has unquestionably gotten worse, but results vary by product group and region. For example, he reports great rapport with the Siebel CRM team in his territory but said he sees much more contention with the Oracle E-Business Suite team.

Partners continue to complain about Oracle's lead registration system, which is meant to protect their deals from going direct, but several partners say they now refuse to register leads because Oracle ends up cherry-picking them and taking them direct.

"Deal reg works for other companies but not for Oracle. It's supposed to protect you from the vendor and from other partners, but it doesn't," said a mid-Atlantic Oracle reseller and implementation partner.

"The frustration of the channel is that when we run with a deal that we brought to the table, Oracle reps, even in All Partner Territories, will throw the [purchase order] over the wall to a fulfillment partner," the partner said.

The issue then is that the fulfillment partner cuts margins to make a cheaper deal than a value-added partner can offer. "If Oracle reps would simply focus on doing more deals rather than scavenging our deals, everyone would be better off," this partner said.

Part of the issue is that Oracle's historical direct sales focus is hard to change, even when it's clear to many that teaming direct sales people with partners will yield more sales overall.

"Most Oracle reps are used to carrying things through from start to finish, even when it's so much more productive to leverage good partners for more accounts and more of the sales process. Would you rather have a jogger run a mile alone, or four world-class sprinters running quarter miles?" asked Rob Wolfe, CEO of AvcomEast, a Vienna, Va., Oracle partner.

In an emailed statement, Oracle president Charles Phillips said the company's alliances and channels strategy in North America remains unchanged.

"Executive turnover is a natural, industry-wide occurrence and does not affect Oracle's overall strategy," Phillips said via email.

The company's decision to split technology and applications channels between two execs should make it easier for "partners to go to market and do business with Oracle," he said.

He pointed out that Prince and Gray both have more than 20 years of experience.

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