Oracle Cuts Some Margins

As of March 1, “fulfillment partners” in price-hold deals will get 5 percent commission rather than the 10 percent that will continue to go to value-add partners, confirmed Rauline Ochs, Oracle’s group vice president North American channels and Alliances.

Price holds are deals business customers cut with Oracle to guarantee a price for a certain amount of time and are common.

To do the math, the change means a partner previously getting $10,000 on a $100,000 deal could now receive $5,000. Many partners say that cut will make it difficult, if not impossible, to make money.

Ochs said Redwood Shores, Calif.-based Oracle worked with partners, and especially its value-added distributors (VADs) Agilysys and Avnet, to formulate this change. But even with partner input, it is controversial.

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“Who determines who’s value-add? Oracle?” snorted one West Coast partner in apparent disbelief. “When will an Oracle rep say a partner adds value?”

The change will impact some partners a lot and others little, depending on their participation in price holds. Ochs said value-add partners are those who co-sell with Oracle, bring in customers, do pre-sales assessments and have demonstrable knowledge of the technology. Fulfillment partners, by contrast, are those who come in at the 11th hour for a piece of the action without putting in sweat equity.

Several partners, including the one quoted above, say in theory they agree with Ochs, but add that value lies in the eye of the beholder.

“There is need for differentiation,” another partner said. “They are trying to protect us.”

But he and others say true fulfillment partners are Dell and CDW, which often swoop in on deals at the last minute and undercut terms.

“Those big players will continue to get the bigger margins no doubt because they’re big and global and touch a lot of clients,” said the partner, who requested anonymity. “We often nose out an opportunity or even get a lead from Oracle. We go in, talk features and functions. This takes time for which we are not paid. Then, what happens is the guy we’re dealing with passes off the paperwork to procurement guys who put the deal out to bid to five other people, two of whom are Dell and CDW, who have done zero work and who typically undercut us,” he said.

At this point, Oracle’s deal-registration system is supposed to kick in. If the original partner registered the lead, he can get one-off pricing to compete with the big guys. But more often, he can’t register the deal because the initial, often vague, lead came from Oracle itself. Because of that, he is unprotected down the line even after spending days or weeks on it, he said.

Dell did not return calls for comment. A CDW spokesman said his company also provides pre-sales support and guidance.

Dell and CDW perform both fulfillment and value-add functions depending on the deal, according to Oracle.

Ochs remains upbeat about progress in partner relationships. Last year, Oracle republished rules of engagement and encouraged partners to escalate conflicts to high-level executives. Oracle Co-president Charles Phillips has won plaudits for his receptivity to partner concerns.

Ochs said a year-old pricing desk has approved 466 partner requests for non-standard discounts. “We went from zero to a lot in no time flat. Partners are using it to justify and gain discounts,” she noted.

Partners and Oracle often seem locked in dysfunction. A Midwest partner said Oracle technology lends itself to a true value-add sale because it is complex and powerful. “Hey, if Oracle was easy, everyone would do it,” he noted. He could also have been referring to navigating the shoals of the Oracle-partner relationships.