Letters to the Editor: It's Time For You to Get Out of the Sun Market

As a regular reader of VARBusiness and your columns I felt compelled to reply to your article denouncing the fall of the Sun channel. As a professional that has spent the last 12 years partnered with Sun as a reseller I believe that I may have some insight into Sun past and future channel strategies. While some of the problems that you identify are real, I don't believe that Suns channel is in anywhere near the state of disarray that you indicate.

Many Sun VARs have not used prudent judgment nor followed Sun's guidance over the past three years. The industry has changed and margin has been under pressure for everyone. Sun has given its resellers guidance in trying to give them a territory that is "indirect only" and preached business strategies that are service centric and solutions driven. Many of the VARs that have struggled would have regardless of what manufactures Unix product they bet the farm on! I believe that you identified three specific areas that were in major disarray within Sun's channel strategy.

1. You say that Sun's effort to maintain a limited number of resellers to insure that the product is not over distributed is a bad thing. I disagree. As the owner of a systems and network integration company I can tell you that overdistribution of product with no value-add covenants controlling that distribution is one of the leading causes of margin erosion and that causes the eventual breakdown in the investments that VARs make into their service delivery capability. This eventually translates to a VAR's failure to deliver a high quality of service resulting in low customer satisfaction.

2. You reference the signing of a gray market reseller of Sun gear as an authorized reseller as a questionable move. I would agree with that if that reseller continued to sell gray market equipment after the signing. If they do not Sun just removed another gray marketer of sun hardware from the marketplace... Not such a bad thing in my book. I can tell you that Sun more than likely has commitments from that reseller to get out of the gray market.

3. Finally you talk of how Sun's channel policies and structure was idiosyncratic from the moment the company signed up its first reseller. I have been managing operations of system integrators for 13 years now and I truly believe that only Novell was in front of Sun in the early days of Sun's entry into the channel. I believe they put much money and energy into building a channel brand, a engineering certification program that was also well-branded and the first reseller contractual vehicle that made value-add a defining element of the relationship that existed between Sun, its partners and its customers. That is what allowed Sun resellers to hold margins and also insured that its VARs were capable of designing and installing and supporting Sun equipment. HP, IBM and Digital had no equivalent business proposition to offer the VAR community. And they still don't. Sell an HP server and get out of the way because HP will be doing the installation of the server and more then likely installing most the software (Omni Back, MC Service Guard etc.). To add to that Sun has created specialty certifications for their resellers in areas such as storage that provide margin enhancement to their committed VARs. Sun to this day offers the best business proposition of all the enterprise UNIX manufactures to resellers interested in providing infrastructure related professional services. Sun also restricts its resellers to selling within geographical boundaries defined by its authorized locations. Again protecting reseller's investments into a given territory.

Now all of that being said Sun has truly made some questionable moves over the past couple of years and continue to struggle with getting back to what made there channel program a good as it once was. They appear to be trying to achieve the volume potential of the NT server market by selling their workgroup servers through wintel volume aggregators that offer no value-add and are notorious for business models that are built to execute on low margins. Big mistake. Solaris boxes need to be sold to new customers and I will roll over in my grave before I will see CDW telerep talk someone out of a Wintel NT server or workstation and up sell them into a Sun server or workstation. So if they will not create new incremental sales that means they will be eroding the business already being serviced by a committed and trained Sun VAR by selling on price. I do not disagree with your point here.

My main point is that Sun has been a good friend to the channel for many years and to lay the failure of any given Sun VAR at the feet of Sun is just wrong. You talk of Sun resellers having to pick up other products to off set the lack of business opportunity from Sun. Well in my opinion if a Sun VAR has not been focused on offering a full stack of solutions covering networking, security, storage, data recovery and network convergence they are exposed and due business at their own peril. Sun has told its resellers this for many years.

So call me a loyalist but I believe many of the systems manufacturers are struggling now and over the years I have seen mistakes made during these tough economic times by many. It takes much discipline by a manufacturer to stick with a heavily leveraged channel program during these times and mistakes do get made. But at the end of the day I would rather work with a company that can look to their successes in the past to help shape the strategies for the future. I truly believe that Sun will do just that.

Stay tuned...

Robert Murphy
President
Networked Information Systems

Robert,

You hit this on the head. Sun is one of the most difficult organizations to work with that I have ever encountered. My opinion is that they are one of the most arrogant bunch to ever walk the Earth. As you have outlined, their little bubble is about to burst.

We have been working with them for the last two years and I have never had to jump through hoops like I have with them. We've had to fight tooth and nail to get authorized to sell on one coast, while we are still attempting to get authorized on the other. We were told they have "too many channel partners," and that they are currently reducing the number thay have.

Selling a Sun server in the past was more of a value sale, but today, with the availability of used equipment, it has be relegated to a volume model. Sub 5% margins are the norm. I am always competing against brokered equipment. Why even bother? In accounts where we have been doing business, Sun has gone in and negotiated a large volume discount directly with the end user, cutting me out. What value do I provide? is the question we get.

The two organizations that have their act together are the ones you mentioned in your article. HP and IBM. We love IBM in particular. They are hungry to work with the channel. HP has some sorting out to do with the merger, but they have had their act together for the past couple of years.

Sun needs to move out of the way and let their channel partners sell their equipment. Even EMC is trying to do the right thing with their new channel focus, although the jury is still out on them.

Just a few comments. Great article.

Anonymous

Robert:

Based upon your Sun column, if I didn't know better, I'd think you had an axe to grind. I have no relationship to Sun but something is amiss in your column. It doesn't quite make sense.

You cannot blame Sun for the VARs that go out of business. That's is a conclusion which is an easy answer, but inaccurate. Encouraging them to abandon Sun, in favor of other supplier is not the answer either. The deals suck there, too.

The VAR business model needs to change again. Years ago, when VARs hardware margins were massively encroached by hardware distributors selling direct, VARBusiness magazine did the same thing. Yelling "No Fair!" Look where that got us.

I encourage you to look deeper.

Sincerely,
Rick Duris

My company has been a Sun Var for the last ten years. We are surviving. I just wanted to add another Sun competitor that really irritates me--GE ITS. Since we choose to buy through GE it makes me very uncomfortable to compete with another VAR that is owned by the distributor.

I appreciate the content and agree with your thoughts in the Editor's Letter of June 10th.

Regards,
Bill Johnson
PWI Technologies

I spent three years as a Sun VAR/integrator. It was the best and absolute worst three years of my career.

A. In the beginning, 1999, the Sun reps were willing and able to work on deals only "big enough" to catch their attention. 2002, they will work any deal they can find, then chastize their "partners" if a deal is lost to a competitor OR walk back in direct and take the deal direct at discounts that "don't provide room for a partner." Sun calls this a "channel plan."

B. In regards to deals, I found several of my hours burned via filing PSR forecasts with reps who "appeared" to have nothing better to do than bug me for numbers in their own attempts to keep their jobs.

C. To be encouraging and positive, when I worked and designed deals, I would "engage" my channel rep at the appropriate time, especially if it was a large "quiet" deal. Several times I suddenly found a Sun direct rep (or "focus rep") working the deal as well. I don't know if the channel people share the leads or if the direct folks spend time cruising PSR forecasts to find deals to take away.

D. I attended several of the Sun "rah rah rah" events and found most executives lying out of both sides of the mouth. "We need partners, we are reducing named accounts, we need our channel." Only to get back and see a new program rolled out where named accounts are reduced, but now over a 1,000 reps became "focus reps," which was every account listed that didn't have a named rep assigned.

E. CDW. What has Sun done to the investment of the VARs that participate (and count most of their revenue in the middle server space) in this space? We spend thousands every year for sales and technical training. But CDW doesn't have to make or spend this level of commitment. As well, talk about margin erosion. Pure and simple, another low-margin player is out there at Sun's disposal to muck up the market more.

F. I've gotten in better physical shape this year thanks to Sun and all the hoops that have to be jumped through to maintain reporting, compliance, certification databases, pricing changes, pleasing and explaining to the field reps why customers aren't spending or have gone with other platforms. I know larger VAR/integrators maintain a small army of staffers to maintain Sun's ridiculous compliance requirements and stay in "Sun's good graces." It's a wonder why the small to medium integrator is dying or looking at other majors to build out its services. Less bull to deal with and re-allocation of staff to perform revenue producing jobs rather than revenue depleting functions.

G. This is my opinion, because I say it as I see it and feel it. I know there are hundreds more like me out there, but keep their mouth shut. Cuz if Sun finds out you are speaking against them or being critical better check your mail for your deauthorization letter next spring.

Ken G

I just read the VARBusiness article posted Friday and also talked with my broker at Merrill Lynch. They rate Sun "neutral," their second worst recommendation to investors.

One of the largest mistakes humankind makes is to ignore the lessons of history. Computers just eat electricity and do nothing useful without computer software. The collective effort to build software that works with a unique piece of computer hardware usually exceeds the cost of developing the computer hardware. Even if the operating system exists for the computer on the server end, the computers on the workstation end of the connection also must work. If the client customer's applications do not work because of closed architecture, the greatest server architecture in the world is useless. Application developers will not invest in the development cost to fit an architecture that few potential customers have or even want to have. A sophisticated customer is not going to risk buying into a computer architecture that does not have good support and reliability from a shaky vendor, even if it meets the need. A sales organization cannot peddle a product if they cannot make money and preserve their reputation as a good solution provider. Without a channel to sell the product, the greatest innovation in the world just sits in the plant waiting for shipment. All of the pieces must work together to insure success and survival. A weakness in any area will produce predictable results (all bad).

When the personal computer began to penetrate the marketplace, the viability of the traditional mainframe architecture was challenged. As these personal computers became more powerful, dumb and so-called "smart" terminals started to head for the obsolescence pile. Mainframes started declining as they gave way to super mini-computers like Sun and DEC. Control Data retreated to the so-called "secure niche market" of scientific computing and mainframe-oriented process-control computing. However, networked high-performance PCs took away much of the scientific computing market. PLCs (programmable logic controllers) defeated the mainframe process-control computers in all but a few applications. Companies began migrating into networked client-server environments with the workstation handling most of the load. The mainframes became expensive file servers. Computers on the server end of the line became more specialized because the computer load could be managed by multiple boxes. The Internet changed the way people looked at computers again in a dramatic way. However, Intel won the chip war with its CISC architecture while IBM, SUN, Apple Computer and others bet on RISC.

Where is IBM and the BUNCH (Burroughs, Univac, NCR, Control Data and Honeywell) today in the computer marketplace? How did they manage to capitulate their market dominance to upstarts like Sun, DEC, Hewlett Packard and other super-mini manufacturers? How did the super-minis fare against the intrusion of Compaq, Dell, Apple, Gateway, HP and the 300,000 Intel Product Dealers that built clones with Intel Inside? If Sun wants to cling to a thin-client computer architecture that was nudged into obsolescence over a 15-year period, their fate is sealed and they deserve it. Their stockholders and sales channel providers do not deserve the betrayal of their loyalties.

Many years ago, the CEO and chairman of the Board of Chase Manhattan Bank, Mr. Agemain, gave the keynote address to the third automation conference of the American Bankers Association. IBM and the BUNCH were there licking their chops with visions of million-dollar computer orders dancing in their heads while they watched the Federal Reserve bury itself in 13 billion checks processed through the banking system with no end in sight. Agemain proposed ALOPTs (Agemain's Laws of Prudent Thinking). Everyone was chuckling except IBM and the BUNCH. I attached it for you enjoyment. Why is the old forever new? His advice is even more appropriate today than it was in the late 60's.

Sincerely,
Roger O'Daniel