Sun To VARs: Sell Services, Not Maintenance Renewals

Sun has been quietly telling solution provider partners that it will cut the discount they receive for reselling renewals to about 5 percent from 15 percent. Distributor discounts are being halved to 2 percent.

Tom Wagner, who in July took over as Sun's vice president of partner sales, told CRN that many solution providers focus on making money through renewals but often do so to the point to where they may snatch deals from other partners just to land the renewals.

"Renewals have a healthy margin. Our discounts are among the highest in the business. But this is becoming a commodity. So we are making that change," Wagner said. "We are providing some real exciting opportunities to sell services and managed services. We feel that moving to higher value-added services benefits both Sun and our partners."

Sun isn't being subtle about finding a way to modify partner behavior, according to Bill Cate, Sun's director of U.S. partner programs. "The encouragement we are trying to apply, not too subtly, is for partners depending on renewals to shift to services," he said. "Before, we saw some resellers go out of their way to grab renewal opportunities from other partners."

Mark Teter, CTO of Advanced Systems Group (ASG), a Denver-based Sun solution provider, welcomed the message Sun is sending with its strategy.

"It's a good message if it can prevent people from coming in and low-balling price and adding no value," Teter said. "ASG has a great maintenance and services department to help customers with maintenance terms. It's good to stop VARs from just flying in and grabbing the renewals without adding any value."

However, cutting back on renewal discounts will hurt many partners, noted Mike Shook, president and CEO of Strategic Technologies, a Cary, N.C.-based Sun solution provider and a co-director of Sun's partner council.

"Americas is the only area where Sun pays full compensation for renewals," Shook said. "Obviously, the move hurts the pocketbook of resellers, and we told Sun that. "But Sun told us they are looking at other ways to neutralize the impact. They told us, 'We know it hurts. We're looking for ways to remove the sting.' "

Sun this week is using distributor Arrow Electronics' MOCA Net@Work conference in San Antonio, Texas, to roll out new services for solution providers.

Sun is weaving three layers of services for partners, Cate said. The first layer is the resale of packaged services, including first response, remote monitoring and system monitoring. At the second layer, Sun will offer enhanced services such as response, backup and restore, managed storage, patch management and system management through solution providers that become certified for such services.

"To make it easy for partners to get certified, we will go on an aggressive, face-to-face, free training road show for them," Cate said.

Sun also is offering co-delivery of services based on certain business practices, he added. On the storage side, for instance, Sun will work with solution providers to co-deliver such services as TCO (total cost of ownership) consolidation, tape backup and restore and implementation of Sun storage arrays.

"The partners can work with our practice engineers to quote services and then go out and deploy the services," Cate said.

On the system side, such services include enterprise consolidation, high-performance computing and business applications. On the software side, Sun will work with VARs to deploy services related to such areas as ID management and Java Composite Application Platform Suite (JCAPS).

To make it easier for VARs to shift to services, and limit the impact on their businesses, Sun is providing a four-month window starting Oct. 1 to prepare for the renewal discount cuts. The Santa Clara, Calif.-based company also is easing the move by unveiling an opportunity registration program for renewal business, Cate said. Sun, too, is considering whether an opportunity registration program is needed for managed services, he added.

Opportunity registration for renewals would be a big help in keeping out partners that don't add value to a deal, ASG's Teter said. Still, he said he doesn't see much value in an opportunity registration program for managed services.

"To sell services, we have to understand the customer environment and their requirements," Teter said. "Customers buy on that understanding. Getting the services four to five points cheaper doesn't impact a customer's decision. For renewals, it helps when you discover an opportunity to be able to stake your claim."