Changing Times At Sun

It&'s been a year of change for Sun Microsystems. The Santa Clara, Calif., company moved its software toward an open-source model and retooled its server lines, including adding models based on low-power, eight-core CPUs. Sun also modified its channel program in part to team its direct and partner sales but raised partner concerns about reduced compensation. Greg Stroud, vice president of U.S. partner alliance sales in Sun&'s Global Sales organization, and Michael Walsh, director of marketing services and communications, spoke with Senior Editor Joseph F. Kovar and Hardware Editor Kristen Kenedy about the changes.

CRN: The last time we talked to Sun executives, they mentioned that the company was modifying its Strategic Data Center Elite program for its top partners so that partners selling into Sun&'s top 100 customers will see greater rebates for registering new deals, while cutting back-end rebates. However, solution providers are also telling CRN that Sun is looking to cut the amount of compensation it gives to its direct sales team to bring in partners on a deal. Is this true?

Stroud: We are trying to change the program so that it is more channel-neutral. If anything, now it is channel-positive.

CRN: So Sun is modifying direct sales compensation for bringing the channel [into a deal] to a lower rate?

Stroud: That&'ll be part of the channel makeover, yes.

CRN: I can&'t imagine that any partner would be too excited about that.

Stroud: Well, if it&'s not channel-neutral, I don&'t expect them to be excited about it. But I&'ve vetted through the numbers and, believe me, I&'m very, very comfortable that it is a channel-neutral program. CRN: Is Sun&'s list of 100 direct accounts available?

Stroud: Our CDPs [distributors] and our field salespeople [have it].

CRN: Is it available to Sun&'s VARs?

Stroud: It&'s available to our CDPs and field salespeople.

CRN: Then how do VARs know that the list is only 100 companies? Some channel partners are telling CRN that the list may be getting bigger—maybe up to 150 companies. Is there creep in the list of Sun&'s direct accounts?

Stroud: I acknowledge that concern. We need to show more consistency.

Walsh: We&'re working to bring out new programs in February. And we&'re working on that list with our CDPs and debating if we will put out that list to our partners. Every year we renew the list. But we are having trouble deciding if it makes sense to publish that list on a Web site somewhere.

CRN: What is Sun doing to help its partners move to more of a service-based business model?

Stroud: What we have been signaling to partners is that a business model primarily on gross margins based on unit transitions is a model that will be challenged.

CRN: What are some things Sun is doing to help partners move away from product-centric sales?

Stroud: We have an aggressive program to marry the ISV community to our partner community with applications to augment their overall margins. We want ISVs to bring them applications with better performance, more scalability, and better time to market, which also benefits our ISVs. [This helps] partners get over the risk of lower-cost hardware.

We are also focusing on more infrastructure solutions with and through our partners. Not break-and-fix maintenance—we&'re doing more bundling [of] this with the products. What we&'re talking about is solutions with more Sun intellectual property, and increased capabilities around [that intellectual property]. There&'s a greater profit margin in software and a lot of services capabilities that Sun has not put in place.

CRN: Sun recently made some changes to its distribution strategy, and we&'re trying to get a handle on what specific market segments you are trying to reach.

Stroud: There are 2,000 accounts that we believe represent a $30 [billion] to $50 billion market opportunity in the U.S. And that is primarily where we focus. And that is primarily where you see [our] channel being directed.

Now the confusion comes around in my mind because we have a very unique, well-positioned, well-priced product with Opteron and Galaxy that would have some appeal below that line of what we&'re talking about.

We&'re going to go in and focus on and apply our resources where we see the greatest opportunity and the highest return. The biggest opportunity for the greatest return in the time frame that we need to execute in is clearly in the mid- to upper-enterprise space.

CRN: How many partners does Sun have in the United States?

Stroud: In the U.S., we have about 600 to 700 partners.

CRN: Is Sun looking to grow that number?

Stroud: We cannot go out into the mainstream part of the market and into the commodity part of the market without a tremendous investment. So, given our market penetration, which is small, [the enterprise] represents a big opportunity to our current partners.