Oracle and Sun VARs hoping for relief from direct-sales anxiety didn’t come out of last night’s Oracle earnings call with much in the way of reassurance.
Oracle execs did not back down from a planned direct sales push both in hardware and software.
Oracle’s new software “is designed not simply to run on premise but also on demand — it’s cloud ready and we will sell the software direct, the old way that is still the most popular,” Oracle CEO Larry Ellison told analysts on the call.
In response to a question, Oracle co-president Charles Phillips said more sales will go direct “incrementally starting this quarter — especially in big accounts….We want partners in new businesses, not coming into the same accounts with us all the time.”
The issue of existing accounts has long been a sore spot for Oracle VARs and is about to become one for their Sun brethren. Oracle partners hate being shut out of “existing Oracle accounts” especially if they brought the accounts at the beginning. Oracle has always pushed partners to get net new business vs. re-selling into the same accounts.
A bigger issue will be how Oracle is changing the compensation model for its sales teams.
“We used to pay on net now we’ll pay on margins,” Philips said.
That phrase opens up a whole world of pain for channel partners who say this means they must now compete even more directly with Oracle’s aggressive sales people. Basically it means that Oracle partners and Oracle sales are competing for the same margin points.
Traditionally, partners made “Net L or net license. If list is $10,000 and the customer or channel and customer get 40% off in total, then Net L is $6,000,” said one long-time Oracle VAR.
This becomes important in smaller deals where the VAD and VAR get 35% discount. “If Oracle sells direct they can give the customer 20 to 25% off direct and save 10 points of margin or more. As far as the customers are concerned, they get 25% off list from the reseller or Oracle — there’s no difference [so] why not go direct? The VAD and VAR get nothing, so Oracle sold Net 75 instead of Net 65.”