Oracle VARs Weigh In On All Partner Territories Strategy

The latest APTs, encompassing Oracle's bread-and-butter database and middleware products, are designed to take most sales to new customers through partners in certain geographic areas. That's right, through partners -- not via Oracle's vaunted sales force.

When news of the new technology APTs emerged in August, a few partners dubbed the whole effort a "grand experiment." On the one hand, it was big news that a company known nearly as much for its iron-fisted, direct-sales tactics as its market-leading database was trying such a strategy. On the other hand, Oracle has gone back and forth on partner-friendly schemes for years.

When the technology APTs started rolling out, Oracle had already developed APTs for its applications, initially for its E-Business Suite Special Edition. (Note: Oracle refers to its database and middleware business as "technology" to distinguish them from its growing applications business.) Oracle also now has APTs for its Siebel CRM business and its other acquired applications, said Rauline Ochs, group vice president of North America alliances and channels at the Redwood Shores, Calif., software giant. Applicable applications sales are to companies with less than $100 million in annual revenue.

Since August, Oracle also has launched an APT for higher-education accounts and another for small and medium government accounts. The company is expected to sort out more APT details and share them internally at its annual sales kickoff in June.

There are now nine technology APTs, and more are planned, according to Oracle. The company typically calculates the size of demand for net new technology business in a given area and then figures out how many "go-to partners" are needed to fulfill it and make a healthy living doing so.

For the technology APTs, the target company can vary in revenue size, according to an Oracle spokeswoman.

One big historical issue in Oracle channel relationships that comes into play with APTs is that Oracle typically relies on partners to generate and fulfill demand among "net new" customers, especially in the midmarket. The problem is that the company's wares already permeate most companies in one form or another, which creates ripe ground for dispute.

Partners repeatedly contend that they register "net new" leads with Oracle, only to learn later that the deal will go direct because that business was in an existing account. Oracle said it does its best to protect partner leads.

And there are some other wrinkles to iron out in APTs. One longtime partner said he was approached last year to participate in a then-new APT. He said the goal was to get three designated partners for the territory. Assuming a third of the business, at his margin, he said he could not afford to hire the talent needed to attack the business effectively.

"There wasn't enough money in it for me," given that qualified Oracle sales and tech people go for "six figures," he said.

Ochs said Oracle runs these numbers constantly to ensure the proposed APTs have enough business to justify partner investment.

"We don't typically flip a territory [to become an APT] until it has sufficient revenue to support 'X' number of partners. Three would be the minimum," Ochs told CRN. "It's pretty straightforward math. We say at $1.5 million at 10 percent margin, you can probably cover the sales rep salary. So there has to be at least $1.5 million times three at minimum for partners to break even."

Another partner said he decided to play in a new ATP because he viewed it as a "Trojan horse" to enter a new territory. He is counting on upsell and cross-sell opportunities with NetApp appliances and Oracle applications to augment database and middleware sales into those accounts.

One concern for Ochs is that some Oracle regional managers have jumped the gun trying to get to APT status. She terms these areas "bootleg" APTs. And there are cases where no one has done the math, and "they don't know if they can or cannot support the partners," she said.

"The good news is [the effort is] going well, and people understand the return is better than what we [Oracle] put in. The bad news is when we're not part of the preparing the structure, training people on lessons learned, they don't execute as well. So we have to hurry up and get the bootlegs official," Ochs said.

Next: Partner reaction to APTs -- location, location, location