Sun Stuns And Angers VARs With Direct Sales Promo

The promotion, which Sun announced in an email to customers -- including clients of its solution providers -- has already resulted in lost deals for VARs and customer pressure to renegotiate deals to match the promotional prices.

The promotion has "created a tremendous amount of problems for us since Sun blasted that e-mail to the community," said Amy Rao, CEO of Integrated Archive Systems, a Palo Alto, Calif.-based solution provider. "Sun is not respecting the partner who developed the business. It's very difficult to understand how they can do this to partners who worked weeks or months on a deal."

Tom Kuni, president of SSI hubcity, a Metuchen, N.J.-based solution provider and past co-president of Sun's national VAR council, said it was hard to believe that Sun was doing this promotion.

"In all my experience in channel sales, I've never before witnessed a more disruptive, discouraging and distrustful act self-inflicted by a manufacturer on its own reseller community," Kuni said. "The program timing and unintended consequences all have real disaster potential."

Dave Condensa, president and CEO of Helio Solutions, a Santa Clara, Calif.-based Sun solution provider and current co-president of Sun's national VAR council, said the Sun's move puts solution providers in a bad position.

"It makes us look like we are less aligned with Sun," Condensa said. "It hurts the relationship we've built with customers over a long time. We're supposed to be the customer's trusted adviser. But when we're hurt by such radical pricing, it affects our role as a trusted adviser."

The promotion, which runs from April 23 to May 7, is billed by Sun as its "25th Anniversary Sale." Among the offerings are some of its most popular servers, including the T1000 and T2000 entry-level SPARC models at nearly 50 percent off list price, the Sun Fire X4500 at 50 percent off, the StorageTek 5320 and 5220 NAS for as much as 60 percent off, and Sun software and services with prices of up to 50 percent off.

One solution provider called the move one of the most ludicrous promotions ever. "It's ridiculous pricing," the solution provider said. "I can't even come close. Even with opportunity registration and special pricing. It's a case of fire, ready, aim."

The biggest question, the solution provider said, is what happens after the two-week period ends. "Are customers going to go back to regular prices? This is a full-blown attack on the channel."

Sun is lowering the standard on their prices and on the value of the company, Rao said. "Moving forward, customers are going to expect to pay the same prices they paid a week ago," she said. "They're not going to say, oh, I understand it was a promotion, now I will pay regular prices."

Actually, Rao said, that is already happening in the second day of the promotion.

"We're already getting e-mails from customers saying, I know we worked out a deal, but I'd like you to honor those [promotion] prices," she said.

Helio's Condensa said that his company has yet to analyze the impact of the direct pricing promotion. However, he said it looks similar to a promotion Sun put in place earlier this year called Sun Startup Essentials, which offered similar products at similar discounts to Web 2.0 startup customers who, because of their location on the West Coast, form an important potential customer base for his company.

That program cost Helios hundreds of thousands of dollars worth of lost business, Condensa said. "The business we lost all came from new customers who had just moved to Sun," he said. "We had already brought them into the Sun ecosystem, and now they are already direct with Sun."

A Sun solution provider on the East Coast said he sees the potential for losing between $500,000 and $1 million because of the promotion.