Oracle VARs Weigh In On All Partner Territories Strategy

Solution providers laud the intent behind Oracle's evolving All Partner Territories (APTs) strategy, but their reviews of the company's execution thus far are mixed.

The latest APTs, encompassing Oracle's bread-and-butter database and middleware products, are designed to take most sales to new customers through partners in certain geographic areas. That's right, through partners -- not via Oracle's vaunted sales force.

When news of the new technology APTs emerged in August, a few partners dubbed the whole effort a "grand experiment." On the one hand, it was big news that a company known nearly as much for its iron-fisted, direct-sales tactics as its market-leading database was trying such a strategy. On the other hand, Oracle has gone back and forth on partner-friendly schemes for years.

When the technology APTs started rolling out, Oracle had already developed APTs for its applications, initially for its E-Business Suite Special Edition. (Note: Oracle refers to its database and middleware business as "technology" to distinguish them from its growing applications business.) Oracle also now has APTs for its Siebel CRM business and its other acquired applications, said Rauline Ochs, group vice president of North America alliances and channels at the Redwood Shores, Calif., software giant. Applicable applications sales are to companies with less than $100 million in annual revenue.

Since August, Oracle also has launched an APT for higher-education accounts and another for small and medium government accounts. The company is expected to sort out more APT details and share them internally at its annual sales kickoff in June.

There are now nine technology APTs, and more are planned, according to Oracle. The company typically calculates the size of demand for net new technology business in a given area and then figures out how many "go-to partners" are needed to fulfill it and make a healthy living doing so.

For the technology APTs, the target company can vary in revenue size, according to an Oracle spokeswoman.

One big historical issue in Oracle channel relationships that comes into play with APTs is that Oracle typically relies on partners to generate and fulfill demand among "net new" customers, especially in the midmarket. The problem is that the company's wares already permeate most companies in one form or another, which creates ripe ground for dispute.

Partners repeatedly contend that they register "net new" leads with Oracle, only to learn later that the deal will go direct because that business was in an existing account. Oracle said it does its best to protect partner leads.

And there are some other wrinkles to iron out in APTs. One longtime partner said he was approached last year to participate in a then-new APT. He said the goal was to get three designated partners for the territory. Assuming a third of the business, at his margin, he said he could not afford to hire the talent needed to attack the business effectively.

"There wasn't enough money in it for me," given that qualified Oracle sales and tech people go for "six figures," he said.

Ochs said Oracle runs these numbers constantly to ensure the proposed APTs have enough business to justify partner investment.

"We don't typically flip a territory [to become an APT] until it has sufficient revenue to support 'X' number of partners. Three would be the minimum," Ochs told CRN. "It's pretty straightforward math. We say at $1.5 million at 10 percent margin, you can probably cover the sales rep salary. So there has to be at least $1.5 million times three at minimum for partners to break even."

Another partner said he decided to play in a new ATP because he viewed it as a "Trojan horse" to enter a new territory. He is counting on upsell and cross-sell opportunities with NetApp appliances and Oracle applications to augment database and middleware sales into those accounts.

One concern for Ochs is that some Oracle regional managers have jumped the gun trying to get to APT status. She terms these areas "bootleg" APTs. And there are cases where no one has done the math, and "they don't know if they can or cannot support the partners," she said.

"The good news is [the effort is] going well, and people understand the return is better than what we [Oracle] put in. The bad news is when we're not part of the preparing the structure, training people on lessons learned, they don't execute as well. So we have to hurry up and get the bootlegs official," Ochs said.

Next: Partner reaction to APTs -- location, location, location

Partner reaction to the ATP effort may vary, based on their location and the Oracle regional managers they deal with. As with any large software company, what gets mandated at headquarters often takes a long time to trickle out to the field. And if sales reps think they will make less money with product flowing through partners, they typically will resist, no matter what word they get from up high.

Don James, CEO of San Francisco-based Bear Data Systems, is part of the Northern California APT. "This is Nor Cal's first foray into this model, if you will. If you look at it year over year, Oracle has become phenomenally more partner-friendly," he said.

"Our customers are in the midmarket and enterprise spaces. Oracle is not really partnering yet in the enterprise. But they're saying it'll come, and we see things trending the right way," James said. "We're hoping [that with] our investment and commitment over the past nine to 10 months since they announced the Nor Cal APT, we will be rewarded by them announcing more APTs in the rest of our core market, in other parts of California."

James added that although his business in the APT has not yet been "phenomenally profitable," it has nonetheless been a "worthwhile exercise."

Rob Wolfe, CEO of AvcomEast, a Vienna, Va.-based solution provider, said his company is not part of an APT yet, but he hopes it will be soon. He credits Oracle with making strides in partner relationships over the past year.

"I'm seeing a cultural change. The field guys [here] are better to deal with, and we're seeing good changes programmatically, It's been a 180-degree change," Wolfe said. "There are definitely areas for improvement, but there is a transformation happening."

One partner who has been in the loop on APT planning from the beginning said the effort is taking more time than expected.

"It's a little frustrating as expectations for partner performance are growing and success stories are being bandied about. But conditions for most partners' longer-term success are still on the horizon," said the partner, who requested anonymity. "APTs have been slow to develop vs. stated plans, and while the early results are promising for some partners, the rest of us are waiting. The under-$100 million no-fly zone for Oracle applications is actually a more promising program but also has limitations that disqualify installed-base customers."