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Historically Oracle really has been kind of a direct sales company. Even today it still has that hard driving direct salesforce and it has come and gone with the channel. What has changed inside of Oracle?
I think that's the right question. I think for us, we have a great product portfolio. If somebody has a better portfolio I don't know who it is. So for us the big issue is making sure we get full distribution. I think apart from other (channel) programs, we don't need a lot of help getting to big accounts.
We are clever enough to know where if you insert some of the biggest customers we can find out where they are located, where their headquarters is, who the CIO is and who the CEO is. And they will generally take sales calls from us.
So our ability then to get to all of the dispersed buying points, small medium business, to all the places that our products are applicable, is hard. Trying to do that in the context of getting smart capable representatives of the company that can then distribute our portfolio to all of the potential buyers that is where the channel comes in.
You can go to the top 200 accounts and find 40 percent of the enterprise market. You can go to the top 500 accounts and find 50 percent of the market. You have got to go to the top 2,000 accounts to get even close to 60 percent. And from there it gets really hard to start getting incremental total available market coverage to cover more accounts. At some point you get to the law of very diminishing returns.
Are our products applicable to a hospital in Tuscon just as it is applicable to Stanford? Sure. Do we have the ability to get to all those buying points? No. I'll give you the flip side of it: we don't need a redundant channel following our existing channel into the accounts we already cover. And that is where many channel programs fall apart.
I am sure I have used this example before when you have covered other companies I have run. I look at demand as the soccer ball in a soccer game: when you get to immature distribution models they behave like five year old soccer games. And all the kids if you watch them they all run to the ball.
When you get to more mature soccer games, people stay in their position and they strategically align to go try to make a grander thing happen. It is the same way with distribution models. We need people playing their positions. Our job is to instrument how we market and distribute that model in a way that everybody is participating and covering the market.
So again if we have partners that all want to run to the ball. Not helpful. Not helpful. So it is really about creating and sort of instrumenting a bigger distribution model that becomes strategic. You said it the right way too: We don't need channel partners just to have channel partners. They have to have a strategic purpose.
So what products go to the channel and what stays with the direct sales force?
I wouldn't look at it that way. To me every channel model has very common characteristics: The target markets have to be clear - I am going here. You go there. The value propostions have to be right.
I think the value propositions for big accounts and for smaller accounts don't necessarily have to be different. Can we tailor some things that are better for departmental systems and better for small medium business? Sure and you saw that, for example, with Oracle Database Appliance.
It was geared and really designed as a small and medium business type departmental product that would be more channel friendly: easier to set-up, provisioned by us, tested by us, one button support, things channel partners and SMB just hasn't seen before.
But get the distribution strategy right; get the target market right and the value prop(osition) right; get the economics for the channel partner right and then; make sure operationally you support the partner. So if you get those four things right my view is generally good things happen with channel partners. Screw any of those four up and it doesn't work so well.
Is there really channel DNA being instilled in the company now?
For this to be interesting it has got to be strategically sound for Oracle. Therefore sustainable. Therefore sustainable for the channel partner to invest. It has got to be structural. It has got to be strategic. It has got to be thoughtful.