Thinking Beyond Databases

His company, known for its database software and development tools, is striving to make a dent in the e-business application and integration market, where it faces off with the likes of IBM, Oracle, Microsoft and BEA Systems. To that end, Sybase plans to get more feet on the street by building a stronger channel presence into its traditional direct-sales model.

"We're not the biggest company, we're not the smallest company," Chen said in an interview at Sybase's new headquarters in Dublin, Calif. "To go to the next level, you've got to get help from other people. And that's just a very logical conclusion, because the direct-sales business is a very expensive business."

Currently, Sybase "is doing very poorly" in tapping solution providers, Chen said. Only 20 percent of the company's sales are through indirect channels, and much of that stems from an OEM agreement with IBM to resell Sybase's integration adapters for connecting legacy systems to Web-based technology, he said.

But Sybase is stepping up its partnering strategy. The company has set an internal goal to derive 25 percent of its revenue through indirect channels by the end of this year, Chen said. Sybase also is aiming to branch out from alliances with large services firms such as IBM and EDS and partner with more regional solution providers, he added.

"Our No. 1 focus in 2002 is to get more channel expenditures," Chen said. "What I worry about is making sure [our partnerships yield results for both partners and aren't just another press release of some kind. And that needs a lot of work and tender loving care and focus."

Sybase's sharper channel focus stems from moves to beef up its product portfolio for the Java-based e-business infrastructure space. Last year, Sybase acquired New Era of Networks and incorporated the integration software vendor's products into a new E-Business Division. Since then, Sybase has aggressively marketed EAServer, its Java 2, Enterprise Edition (J2EE)-based application server, plus its Enterprise Portal Server and New Era's e-Biz Integrator product as the core of an end-to-end e-business platform.

In late January, Sybase enhanced its e-business platform with PowerDesigner 9.0, an update of its design tool; Enterprise Portal 2.5, an update of its portal product; and Business Process Integrator Suite 2.1, a bundle of Sybase and New Era products that includes the Web Services Integrator, a module for generating Web services.

Late last month, Sybase outlined its Web services strategy, saying it would support enterprise-class Web services in its products plus deliver solutions to help integrate and adapt Web services in existing IT architectures.

Some solution providers, however, say it will take time before the industry deems Sybase a serious contender in the e-business infrastructure arena because the company is still widely associated with the database and PowerBuilder client/server development tool products that put it on the map in the early 1990s.

"I'm still stuck in the old days, when they were competing head to head with Informix and Oracle for the database market," said John Hitchcock, vice president of marketing at eForce, Hayward, Calif.

Hitchcock added that he's not very familiar with Sybase's new e-business offerings. "I haven't really followed Sybase since it went through some ups and downs as it fell out of the race of the short-list [database pick."

Sybase is only beginning to garner some channel recognition as a technology provider for building Web-based solutions, according to Bill Green, president of Power 3, a Marlton, N.J.-based integrator.

"There is still a perception of Sybase as a developer tool and database client/server [vendor," Green said.

Such stereotyping could make it difficult for Sybase to convince solution providers to use its e-business platform, some channel executives said. For instance, Hitchcock said Sybase recently contacted eForce to set up a partnership, but he hasn't returned the call yet.

"From our perspective as a midsize systems integrator, it's too early to tell [whether we should partner with Sybase," Hitchcock said. "We haven't aggressively gotten in touch with them."

Still, Sybase,which also has wireless (iAnywhere Solutions) and e-finance (Financial Fusion) subsidiaries,is working to align with solution providers more closely, company executives said.

In fact, much of Sybase's channel efforts are being focused at the field-sales level, said Marty Beard, vice president of corporate development at the vendor. Though Sybase doesn't give incentives to its sales force for working with partners, it does encourage channel sales, he said.

"If you're in the field, you're going to see more leads and more business if you engage with a systems integrator," Beard said.

Sybase also imposes price limits on its sales staff so they can't discount products in a way that would preclude the company's partners from fairly competing for a deal, according to Chen. "We set up and control our pricing methodology so that our direct-sales force will never be able to undercut our partners," he said.

Nevertheless, pricing in the channel involves a balancing act that's not without conflict, Chen added. "You want to incentize the partners working with us. But on the other hand, you want to make sure you have a financial model so you don't get into a situation where your margin gets squeezed and you start having financial troubles," he said.

Chen points to Sybase's newly honed channel strategy, financial stability and commitment to open-platform products as a compelling draw for partners. "Why would [solution providers want to work with us? Well, No. 1, we're not going to have a direct-sales force that competes directly with them, because [our sales force doesn't have any incentive to do that," he said.

"No. 2, they're dealing with a company that has a lot of open-systems technology and a company that is very financially strong."

Indeed, Sybase has remained largely profitable during the lingering recession. In fourth-quarter 2001, its most recent financial period, the company posted pro forma earnings of $31.3 million, or 31 cents per share, topping Wall Street's consensus forecast of 24 cents per share. On an as-reported basis,including the amortization of purchased intangibles, stock compensation expense, and restructuring and other charges,Sybase's earnings in the quarter were $6.1 million, or 6 cents per share, on revenue of $236.3 million.

For fiscal year 2001, Sybase reported revenue of $926.1 million, compared with $960.5 million in 2000, and pro forma earnings of $96.6 million, down from $115.3 million the prior year. On an as-reported basis, the company posted a fiscal 2001 loss of $25.5 million vs. earnings of $72.1 million in 2000.

Solution providers attest to the interoperability of Sybase's products,a key capability amid the slow economic climate, since many customers prefer to leverage legacy systems instead of ripping them out and implementing new ones. For example, the Sybase EAServer app server enables developers to build applications in a variety of environments,including C++ or Sybase's own PowerBuilder tool,and deploy them as J2EE applications, said Dean Jones, CEO of PowerTeam, a Minneapolis-based solution provider.

"If I take a PowerBuilder component and deploy it on EAServer, it looks like a Java-class [component," Jones said.

While such cross-platform support may differentiate Sybase from competitors, the company still needs to do a better job in getting the word out to make a name for itself in the e-business platform space, industry analysts say.

"The biggest problem for Sybase is marketing," said Thomas Murphy, an analyst at research firm Meta Group. "Sybase can grow some market share and will be able to sell [e-business products into existing clients. But they can't grow out of that [database business unless they get on it with marketing."

At least one solution provider, however, is getting Sybase's new message. JoAnn Clare, director of strategic alliances at DMR Consulting, said her Edison, N.J.-based company recently struck up a new relationship with Sybase out of previous talks with New Era of Networks. By incorporating the New Era products into its portfolio, Sybase now can provide channel partners with a broader range of offerings to sell, she said.

"We've seen a willingness on their part to partner,and partner in areas other than just as a database company," Clare said. "That's what the real value to us is."