Oracle Lays Off Veteran Channel Execs, Cuts Support Staff In Push To Sell More Cloud Licenses Direct

Oracle last month laid off several channel and sales executives as well as its entire channel pre-sales technical support team -- a move that bolsters the company's plans to push more cloud licensing sales direct, according to multiple sources close to the vendor.

Oracle in early June notified between 225 and 300 members of its North America sales team that they would be laid off at the end of the month, including many sales engineers and sales consultants who worked closely with channel partners, sources said.

"Oracle has laid off its entire channel pre-sales technical support team. These are the specialists who go into the customer with the partners and determine how the solutions should be engineered and fit together," a source close to the Redwood Shores, Calif.-based software giant told CRN this week. "This is going to make it difficult for the channel to get deals closed," the source said.

[Related: Oracle Confirms 12.2 Database Release Will Be Cloud-Only At First, Analyst Predicts Move Will 'Frustrate' Customers]

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Oracle CTO Larry Ellison has been forthright about his desire to beat out to become the first SaaS vendor to reach $10 billion in annual sales. The layoffs may shed some light on how Oracle plans to reach this lofty goal as the company adjusts its workforce to bring in skills that better suit the cloud era, sources said.

Some of those let go were vice president-level sales managers who'd been focused on selling hardware and on-premise software at Oracle for more than 20 years, sources said.

Gary Koopman, group vice president of alliances and channels in Oracle's North America sales group, was among those laid off, according to the sources. Koopman, who joined Oracle four years ago from Hewlett-Packard, managed a team of 85 Oracle channel sales executives, according to his LinkedIn profile.

Also included in the layoffs was Christine Aumann, a 15-year Oracle veteran who was director of sales consulting for Oracle's North American hardware alliances. Aumann led a team of pre-sales technical support staff that worked closely with Oracle partners, but that team was let go in the round of job cuts, said the sources.

Several other longtime Oracle executives were laid off in last month's cuts, including Steve Vakulskas, group vice president of North America technology sales consulting and a 23-year company veteran; Anthony Cioletti, a senior sales consulting manger and 21-year Oracle veteran; and Dennis Schurmeier, an 18-year Oracle veteran who was sales consulting manager in Oracle's public sector business.

An Oracle spokeswoman declined to comment on the layoffs.

In an emailed statement, Bill Swales, Oracle's group vice president of North America sales, said partners are on board with the vendor's ongoing shift to cloud computing.

"As a company, our number one focus remains clear. We are committed to continuing our investment in resources that are critical to the success of our partners’ and customers’ transformation to the cloud," Swales said in the statement. "The response from our partner community has been incredibly positive as we expand our offerings, invest and enable our partners to help them grow their cloud business."

Sources told CRN the channel layoffs are part of Oracle Co-CEO Mark Hurd's efforts to drive more cloud licensing sales through his direct sales force, with partners focusing on systems integration work. This will essentially "disaggregate" partners from the cloud licensing transaction, several sources told CRN.

"[Hurd seems to] feel at the end of the day that to drive cloud sales he does not need anybody in the middle. He doesn't need the channel. He doesn't need the partner," said a source close to Oracle. "He thinks these sales are the type of sale that should be done by the vendor direct to the end user."

Partners that are accustomed to the consultative work that goes into being a "trusted adviser" for their customers may have a tough time adjusting to the shift, the source said.

"They don't want the channel doing the up-front transaction work. This changes the dynamics with the partner and the end user. This makes the whole relationship with the partner and the end user more complex – not less," said the source.

Hurd is also working to reshape the vendor's sales team with younger, less expensive staff. Hurd, on Oracle's fiscal fourth-quarter earnings call last month, said the vendor is expanding headcount in Oracle Direct -- its inside sales team -- and described its efforts to achieve "a lower cost of sale."

Oracle Direct now has inside sales teams in Boston; Austin, Texas; Redwood Shores; and Santa Monica, Calif.

While Oracle is hiring inside sales people to cover more of the SMB market, it's not looking to reduce the size of its overall workforce, according to the source.

"Oracle is getting rid of the channel-focused people and investing in the direct side of the business," said the source. "Oracle wants to push more revenue to a cloud-based sale, and in doing so, they feel it is best managed by their own direct managed, badged people."

Ellison said last month he thinks the vendor has a "fighting chance" to beat to $10 billion in annual sales, but it's got a lot of catching up to do. Oracle had total SaaS and PaaS revenue of $2.2 billion during fiscal 2016, up 49 percent from the year before., the top SaaS vendor, had revenue of $6.67 billion for its fiscal 2016 and expects fiscal 2017 revenue of $8.08 billion to $8.12 billion.

To get partners on board with the effort, Oracle is claiming that every dollar of a cloud sale equates to $8 to $10 in cloud integration services for the channel. Several partners told CRN this claim, if accurate, could lead to a bonanza of channel opportunity.

"Oracle has to ramp up and sell almost 50 percent more SaaS over the next 13 months to meet that $10 billion number," said one partner who's working with Oracle on cloud sales. "That's going to open up phenomenal opportunity for partners, but you need to be really well positioned in the cloud marketplace to take advantage of it. That is the main play Oracle is making here."

Oracle's cloud sales push could threaten one of the vendor's biggest cash cows, however. Oracle made $18.86 billion from traditional on-premise product support and software license updates during its fiscal 2016, which accounted for 51 percent of its overall revenue.

If Oracle is unable to get its on-premise software customers to switch to cloud, it risks losing business to, SAP and other rival vendors, one partner told CRN.

"Oracle has to protect that turf, so they are getting aggressive about selling and pricing cloud, and that's a good thing for partners. There are going to be a lot more opportunities for partners who are cloud-certified," said the source.

As part of the cloud sales initiative, Oracle is recruiting partners that focus on specific vertical markets to work with Laura Ipsen, a senior vice president and general manager in the vendor's Global Industry Solutions Group, sources said.

Ipsen, who joined Oracle two years ago and has previously worked at Cisco Systems and Microsoft, is leading the vendor's efforts to get partners selling cloud solutions for vertical markets, said one of the sources.

"They have moved some pre-sales reps under industry solutions, and they want partners to pick up some slack and get out in the field getting deals done – not just holding onto Oracle's coattails," said the source.

Steven Burke contributed to this story