Page 3 of 8
The meeting with Avnet and Arrow partners earlier this year was a turning point. What did you take away from those meetings and how did you go back and develop the program?
On the economics side, I did not love the economic model because it was more of one sort of standard model. My view of the channel is that the channel should be treated just like a (direct) sales organization. We are going to compensate them based on performance. The better they perform the more they make.
What we wanted to have was a model where the more you did and the way you did it was important to us. So if you sell a box that may or may not be interesting to us, but if you sold the box to that target market, to that hospital that we can't cover that is more interesting to us. If you sold that box with our storage that is even more interesting to us. If you sold it with our support that is even more interesting.
By the way if you did two, three, four or five times (those things) then it gets even more interesting to us. So we want our (indirect channel sales) renumeration to work in alignment with what motivates us. That allows it to be sustainable and strategic for us. That was point one.
Point two. We had a big issue even with our own guys. These channel guys, our channel guys, would get paid if the partner sold it into a big account or into the specific target market. So our own compensation wasn't aligned to the strategy I am describing. So we don't want our (channel) guys getting paid unless the partner is successfully executing what we described. And if they do distribute it into one of these accounts that isn't part of the target market I don't want our channel sales organization getting paid.
So for us it is getting our group aligned. So it is getting the target market right, making sure that we say these are the accounts we are calling on. Mr. Channel partner if you are up here it is not a program that is attractive to us. You go here. Our (channel reps) people now get paid in alignment with you. You'll get paid in alignment with what is strategically valuable to us.
The third piece is I think most of our products are channel friendly. We have been working on trying to get certification programs for things like Exadata where we think certain channel partners willing to invest in SG&A (Sales General and Administrative expenses) can be a value add to bring that product into target markets that frankly we are just not going to cover.
That product right now is the iPad of the enterprise and we want more distribution - not less. That said, we can't take that product to market without people having specific expertise. It is a storage server. It is a compute server. It is software. It is integrated together. It disintermediates a significant amount of integration services that most customers have to execute on their own. It has got remote patching. This takes a reasonably seasoned sales person to go sell it. So we want to make those certification programs available.
The Oracle Datababase Appliance was very much designed to get an entry level engineered system into the market that could both apply to departmental and small medium business opportunities and still get the benefits of the engineered system. Perhaps not at the size of an Exadata.
So we actually went purposely to go get a value proposition pulled together and we gave some attractive licensing features with the product and if done right the channel has got a chance to make not just better rebates. There is margin in the material opportunity for them to just get a better margin on the product itself.
None of these things in isolation. Look it has got to be all of the above orchestrated together. If you don't get the target market right, meaning if our people are bumping into the channel, and the channel is bumping into our people and they are not in unison, this doesn't work. If the economics aren't right, it is not going to work. If the value props aren't lined up it is not going to work.
So I could have great economics and if I have nothing to sell it won't matter. So it is getting all those things right.
NEXT: Mark Hurd On Keeping Channel Discipline