Q&A With Bill Cate, Sun's New Head of Global Channel Strategy

longtime partner exec Bill Cate VARBusiness

VB: Now that you have reached the milestone of consolidating the former iForce partner programs, what basically has been accomplished?
Cate: We have launched the basic frameworks of the program--the boring stuff, such as membership requirements, competency requirements and the nuts and bolts of what you need to have a good, solid operational program. To be honest, we are at various stages of completion of that around the world. It is safe to say that we have officially launched the framework for Sun Partner Advantage globally. Now the fun part begins where we actually start to build in advantages for the partners who are at the new Sun Partner Advantage levels.

VB: Where are you with regard to your progress in the North American market?
Cate: We have rolled out three new program levels in North America--an associate level, a principal level and an executive level. The participation criteria are based on a few variables, first of all the infrastructure investment that a partner makes at Sun. Most principal-level partners have invested in competencies to specialize in one of our platform areas, such as systems, storage, software or advanced services. If you move up to the executive level, you find partners at a smaller level that have made investments in all of Sun at all levels to some extent. In North America, we have classified partners into these program levels, and we have a system in place to compensate them for meeting directional types of targets, like where they are selling. In other words, a partner can earn more at the principal and executive levels for selling into certain markets, new customers, spaces where we have less coverage. Where they sell is recognized. We define that very clearly with our channel partners where we are willing to compensate more.

I want to be clear: All partners participate with Sun in all of our accounts. If we have a very large Sun account in the Americas that may be classified as one of our top 100 accounts, we definitely want partners there, but it will be truly based on their value add to that account. Where we are compensating more heavily is in our portfolio and territory accounts, where we have less or no Sun coverage. We have sales teams that will go there with the partner, but much fewer resources. In those cases, the up-front transaction margin is typically better, and the back-end rebates paid are much higher as well.

VB: How much higher?
Cate: It really depends on the program or initiative. For instance, a storage program has probably two times more back-end rebate rewards than selling the same storage product into a large existing Sun account. In some cases, if it's a brand-new customer that the partner brings to Sun, the rebate [can be] 10 times. It's all around the philosophy that we don't expect partners to go into markets without us. It's our job to stimulate demand, but as they invest resources and help us grow in those accounts, we want to pay them more. That's the philosophy of the SPA in the Americas.

VB: What about the front-end margins in the different types of accounts?
Cate: Front-end margin [and market development funds] is the same everywhere, but when you get into reality and you go into a large account and large end user discounts are already negotiated and competition is heavy, by most accounts the transaction margin becomes squeezed. Partners who engage with us through the teaming process have to be recognized with some margin protection. That's where the value portion comes in. When resellers and global systems integrators are participating with Sun, or if we are participating with them, we are doing it because they bring something to the table that we don't do very well. So transaction-wise, we will try to protect the basic transaction margin through teaming and registration processes, and in some cases we will try to compensate more in the transaction margin, depending on the types of value. We are trying to be more specific about what types of value we are willing to pay more for. It's a very difficult discussion to have. We are trying to work on some clear guidelines for our partners and our sales organization on the kinds of value we are willing to pay more for. Starting in our fiscal year 2008, which is in July, you will see a little more discipline in the kinds of guidelines our sales organizations would use when trying to determine what value really is.

NEXT: Specifics on guidelines already in place.

VB: What are some of those guidelines you've already issued?
Cate: We have a decision tree in place that is part of our deal-management process, that helps our deal managers and regional sales executives to determine if a partner needs an extra eight points on an opportunity. They will ask, is the partner bringing a turnkey application to the table that is purely unique? Have they invested physical resources in doing demos and proofs of concept? Do they have an allegiance and/or a sales relationship with one or more of the ISVs involved with the opportunity? It's fairly easy to understand values that have been brought to the table. Where it becomes dicier is when value is less obvious. Coverage and account relationships in the form of value may not be worth the same percentage as somebody who has a turnkey financial application. Trying to put some kind of guideline on certain kinds of applications is hard to do, but it's imperative.

We built the Sun Partner Advantage architecture on top of our four business units. The structure is built on four platforms. It is a bit of a change; we are much more aligned than we ever have been with the business units. For instance, John Fowler's [systems] organization's VP of marketing is totally engaged with what the channel strategy means for all of their product lines.

VB: What impact is the new Intel pact having on the channel?
Cate: To the channel it is one more flexible opportunity for them to have another business discussion in their current accounts, but also it gives them the ability to call on accounts where Sun wasn't an option. Solaris adoption is going to be driven by the fact that Xeon has such a significant market presence out there. Solaris will give Intel a much broader presence in the data center, with partners that maybe built their racks and Web servers on Intel-based platforms.

VB: So you see any other changes in the go-to-market or distribution strategy?
Cate: I think at this point our channel is relatively mature and execution of the partner advantage program is where I am going to focus to make sure we are rewarding partners for the right kinds of behavior. I do see us taking a bigger role in capturing new customers, or customers at the edge of the enterprise where Sun wasn't necessarily part of their short list. The operative word is execution right now. It's getting in front of the right customers making the buying decisions and giving them a compelling story.

VB: Are you seeing new partners showing up on the scene?
Cate: I am, and that brings up a strategic discussion. Sun has been very focused on the partners that have invested in Sun, but we haven't gone out and aggressively recruited. We have recruited partners to fill coverage and solution gaps. As we look at the awesome technical story we have with our entry level servers, I think we have an opportunity to recruit new partners who are approaching us today and are representing a Wintel story and/or Linux story on Intel or AMD. We want to be more open to have discussions with those guys and how they would fit in.

VB: How would you compare your approach to the channel to that of IBM and HP?
Cate: I think where we separate from the pack is our leverage of the partner community, and professional services is quite different. We don't have the professional services resources to do those things. We have to leverage partners who do that. We have no hard decks; partners play everywhere in all of our accounts, and we do not compete with them when it comes to a services delivery strategy.