Sun To Revamp Channel Program
Sun also agreed to limit changes in its channel program to once or maybe twice a year, said Bill Cate, Sun's director of U.S. partner programs.
Most of the changes are slated to be unveiled to solution providers Thursday via a Web-based meeting, and many of the changes are due to go into effect Jan. 1.
Speaking to CRN after a Sun VAR council meeting earlier this week, Cate said solution providers made it clear that they seek stability from Sun's programs.
"What they said to us is, 'stop making so many changes throughout the year,' " Cate said. "They told us to go with changes once a year, at most twice a year. I don't want to put words in [Sun's Vice President of Partner Sales] Tom Wagner's mouth, but he stood up and said, 'We will do that.' "
That's good news for the channel, said Kip Lindberg, vice president of enterprise sales at Ncell Systems, a Minnetonka, Minn.-based Sun solution provider. "Sun's programs definitely change too often, and not always to the better," Lindberg said. "Sometimes it changes for change sake."
The last change in Sun's channel program was unveiled in October, when the Santa Clara, Calif.-based vendor caused angst among many solution providers and distributors with a plan to halve maintenance renewals rebates starting Jan. 1.
That plan already has stirred up the channel. Lindberg said solution providers were very active in November and December trying to close renewal contracts before the rebates got cut. "November and December were Ncell's biggest renewal revenue months ever," he said.
At the VAR council meeting, Sun discussed the renewals question with VARs who said they're looking for ways to make up for the lost revenue, Cate said. In response, Sun has set up a subcommittee to look at new ways to compensate partners, based on new criteria such as the on-time renewal rate and the delinquency rates, he said.
Among the changes that Sun will implement in January is a revamped rebate program for its StorageTek Elite partners that's aimed at emphasizing overall revenue, rather than revenue growth. Currently, StorageTek Elite partners are paid a rebate based on growing their storage revenue on a year-to-year basis, with a 2 percent rebate for 10 percent growth, a 4 percent rebate for 30 percent growth and an 8 percent rebate for 40 percent growth.
However, Cate said, the growth-based rebates created difficulties, as solution providers weren't able to accurately guess what the rebates would be in a given month, making it hard to determine how to compensate their sales personnel. "They weren't sure if they could hit the next step," he said.
The program hurt Sun, too, Lindberg said. "Some VARs try to push sales to the following quarter in order to maximize their rebates," he said. "I can understand why Sun would do that."
Going forward, rebates will be based on revenue and be weighted toward developing new storage business, Cate said. Starting in January, the rebates will be 3.5 percent for dedicated accounts, which are customers with a strong Sun presence, and 5 percent to 6 percent for portfolio and territory accounts, where Sun's presence is more limited, he said.
Tom Kuni, president of SSI hubcity, a Metuchen, N.J.-based solution provider, said the focus on revenue instead of growth will benefit the channel by giving partners better insight into what to expect.
"Any changes to the Sun StorageTek Elite program that gives greater predictability to the rebates is good by me," Kuni said. Sun also is making changes to its opportunity registration program to move from emphasizing long-term projects toward rewarding VARs for bringing in more transactional deals.
Sun's current opportunity registration program focuses on what Sun calls "Resale Teaming Agreements" for large projects, Cate said. "But partners want us to be more aggressive on opportunity registration with shorter deals," he said.
That's a good move, said Pat Edwards, vice president of sales at Alliance Technology Group, a Hanover, Md.-based solution provider and a member of Sun's VAR council.
"Sun said they are moving toward what I call 'Teaming Agreement Lite,' " Edwards said. "That will be a big help in setting up transactional deals. Today, you have to prove you have multiple projects, and once you go through all that work, you get six months of deal protection. You don't need to kill a flea with a bazooka."
The current program is too cumbersome, Lindberg said. "I don't have a lot of warm and fuzzies for it," he said. "It's very convoluted. I've never been excited about it."
Solution providers also are concerned that some of Sun's field-sales staff -- especially some former sales reps from StorageTek, when Sun acquired that company -- are trying to take some of their deals directly to VARs and bypassing distributors.
The uptick in direct VARs, or DVARs in Sun parlance, came about when Sun incented many of its sales reps with commissions based on the total revenue of a sale, regardless of the cost of goods, said one solution provider, who requested anonymity.
"So the sales reps would drive the price down and get a solution provider to take the deal direct from Sun to increase his margins," the solution provider said. "That not only hurts Sun's CDPs [channel development partners, i.e. distributors], it hurts Sun as well because it isn't set up to handle financing for too many partners."
Edwards said the DVAR issue has come up from time to time, but he hasn't felt the pain of the issue for some time. "DVARs might get special discounts I can't get," he said. "But with opportunity registration, I can get better pricing than the DVARs. That levels the playing field."
Sun is monitoring the DVAR issue, and its channel executives have said it is not the vendor's intention to bypass any layer in the channel, according to Cate. "We will take action to address any issues," he said. "We are not on any path to grow the level of DVAR activity. There was some activity, but it's not getting out of hand."