Sun Outshines Competition: Profit Potential

Sun seems to be doing a pretty good job at figuring out the win-win formula: The company scored a 73 for revenue/profit potential; HP and Compaq tied for second with a score of 68. One reason for Sun's improved margin potential is its expanded co-op marketing funds, says Robbie Turner, vice president of client and technical market products for Palo Alto, Calif.-based Sun. Another reason is Sun's emphasis on solution providers, she says.

"The majority of Sun's workstation products go through channels," Turner says. "We're very focused on the channel."

That strategy is paying off.

"Sun has one of the better channel models," says Steve Bulmer, chief technology officer at The Allied Group, a Glastonbury, Conn.-based authorized Sun reseller that specializes in e-business solutions. The vendor protects its channel partners by not authorizing an excessive number of integrators, he says. In addition, Sun frequently recommends a go-to partner for business opportunities and does not compete head-to-head with its direct sales force, Bulmer notes. And Sun's hardware margins are usually slightly higher than other fully commoditized hardware, he adds.

Sun also took honors for product quality/functionality, garnering a score of 84. IBM placed second with 83, while Compaq and HP tied for third place with 82. Dell finished last in product quality, but placed first in product availability with a score of 79, followed by HP, Sun and Compaq. IBM finished last.

"This year, we came out with two new product lines and had the transition to Ultra SPARC B. Every year that we have a transition, we hit speed bumps," Sun's Turner says.

For its part, IBM hopes to improve its last-place showing in product availability by expanding the ways in which integrators can purchase its products, Vitagliano says. Although IBM continues to work closely with distributors, the company recently gave smaller VARs the ability to order directly from the vendor via its Partner Choice program.

"One of the things we've heard from VARs for a long time is they'd like to have choices in how they can access products from IBM," Vitagliano says. "There are cases where a small VAR with small quantity transactions wants to work directly with us. It's just an expanded fulfillment choice for VARs."

Part 1: Sun Narrowly Outshines the Competition

Part 3: Portal To Productivity