A "Gentler" Giant's Success in Reaching Out to the "Little Guys"


Originally published - May 21, 2008

For a long time, the products of Oracle, the world's largest enterprise software company, have been regarded as the “golden” technology standard (in terms of security, scalability, and availability) among the largest corporate clients. In other words, the vendor’s forte has always been the selling of enterprise-class software (i.e., high-performance, though with a hefty price tag) to enterprises. Additionally, the giant has not been known for taking much of a “touchy-feely” approach toward customers; its partnership strategy has not been too cuddly either (except for those partners that match Oracle in size and might).

Oracle PartnerNetwork (OPN) is a global business network of more than 19,500 companies that deliver innovative software solutions based on Oracle software. For an annual fee of $1,995.00 (USD) and by allowing access to Oracle’s premier products, education, technical services, marketing, and sales support, the OPN program provides eligible partners with the resources they need to be successful in today’s global economy. But only partners that are able to demonstrate superior product knowledge, technical expertise, and a commitment to doing business with Oracle, qualify for the Certified Partner levels.

Given its slew of acquisitions over the last few years, Oracle has become an even larger cash-making machine than it was. Because of this, many observers have expected this ever-mightier powerhouse to become even less approachable and more difficult to work with. After all, Oracle’s flagship database product still has a major share of the relational database software market, and the vendor is competing head to head with SAP to be the leading supplier of enterprise applications to large corporate customers.

Such success can easily go to anyone’s head, but lately, Oracle has been making concerted efforts to penetrate the small to medium business (SMB) market segment and to become more partner-friendly.

Even though a significant proportion of its customers have 500 employees or less (which the company regards as midsize businesses), Oracle, despite its stable of nearly 20,000 channel partners, has not fared as well in selling to businesses with less than 100 employees. Oracle regards such businesses as small—a market where Microsoft SQL Server database, Microsoft Office desktop and business intelligence (BI) applications, and .NET Framework- and Microsoft Windows–based application servers reign. It is the lower end of the SMB market (the “S” part) that Oracle is now trying to penetrate.

While the new small business–oriented programs cover Oracle technology products only (their underlying platforms and infrastructures), the vendor is also targeting SMBs with its application software through the Oracle Accelerate program. This program was announced at the Oracle OpenWorld conference in late 2006. Under this initiative, channel partners are able to assemble vertical solutions using pre-integrated core application bundles from Oracle's E-Business Suite (EBS), PeopleSoft, JD Edwards EnterpriseOne, and Siebel product lines. Channel partners can do this with accompanying workflow and best-practice system configuration templates, called Oracle Business Accelerators, between the applications.

Thus far, this ambitious program has been successful: the regions or industries for which Oracle Accelerate solutions are already available have been showing higher revenue growth compared to those that continue to work with a traditional approach (meaning lengthy implementations—from scratch).

Appealing to the Little Guy (and Partners Too)

To break into the SMB market, Oracle recently formed the Technology Channel Sales Program Office. Its charter is dedicated to increasing Oracle's technology license revenue, margin, and overall share in the general business market. The office has been established to drive new programs, with the goal to increase customers’ and partners’ access to Oracle 1-Click Ordering Programs and to lower transaction costs.

Creation of this office has come after a long process of channel investment by the vendor, starting back in 2004 with the release of Oracle Database Standard Edition (SE) and Oracle Database Standard Edition One (SE One), and with establishing Dell as a global reseller. Shortly after, Oracle launched the preinstalled Oracle Database SE One, available on two-processor servers and with “shrink-wrap” licensing for the database through partners; CDW Corporation was established as its global reseller in 2005.

2006 saw the release of Oracle Application Server SE and Oracle Application Server SE One, as well as the addition of Ingram Micro and Tech Data as global distributors. Later on, Oracle introduced its transparent SMB Technology suite price list and launched the new OPN Solutions Catalog. In 2007, prior to the establishment of the Technology Channel Sales Program Office, the company launched several technology centers in the Europe, Middle-East and Africa (EMEA) region and associated technology newsletters, while Ingram Micro and Tech Data together recruited over 400 new resellers to Oracle.

For any enterprise IT vendor seeking to reach smaller customers, well-versed regional partners are an obvious source of help and an avenue to pursue (see The Cha[lle]nging World of Value-added Resellers). Thus, in mid-2007, the Oracle revamped its partner program to make it more cost-effective and pragmatic for smaller partners to get on board and “ramp up” (build up) their business. Oracle's hope is that the inflow of such partners will cause the smallest customers to also see Oracle’s entry-level technology products as feasible solutions for their businesses.

After much thought and self-examination, Oracle identified a number of hurdles to the adoption of its technology by smaller customers and partners alike. To get around these obstacles, the vendor has embarked on a mission to evolve its large enterprise-oriented programs, simplify its complex systems, and refine its business practices accordingly. Proper packaging of solutions, improved pricing, more flexible licensing, and continued robust software capabilities have made Oracle’s mission a success. Furthermore, execution of small business programs has come from the alignment of Oracle’s go-to-market strategies, improved brand recognition, and awareness in the segment, bundled with targeted campaign vehicles.

Put in more concrete terms, Oracle has identified the inflection point for its database deals at about $6,000.00 (USD), a figure above which the vendor wins the vast majority of deals. However, Oracle concedes Microsoft has had a higher win rate in database deals below $6,000.00 (USD). Indeed, database sales opportunities of $5,000.00 (USD) or less have been much less profitable for Oracle so far. Since many such sales go through the channel, Oracle has found that its major hurdle to sales in this area comes from the hefty fee a small partner must pay to join OPN in order to complete a single transaction.

Previously, a channel partner unaffiliated with Oracle but interested in selling an Oracle database solution worth several thousand dollars would have to join the partner program (with its prohibitive fee), sign a lengthy legal agreement (with multiple pages, fine print, and footnotes) with Oracle, and sign a similar legal agreement with a distributor. This OPN account creation, partner agreement and notification, and verification and activation, would typically take five to 30 business days to complete. Add to this an additional three days to several weeks for the process of order booking and fulfillment.

Conversely, the same partner looking to sell a Microsoft SQL Server or .NET-based server solution would simply remit payment to Microsoft, without paying any fee, and with registration and fulfillment completed in a single day—much to Oracle’s dismay and unhappy acknowledgement.

More recently, Oracle initiated the intermediate OPN QuickStart program that, for an annual fee of $300.00 (USD), allows solution providers to resell a limited assortment of Oracle 1-Click Ordering Programs and to receive limited OPN benefits. Also, the QuickStart program is available only in North America via authorized value-added distributors (VADs). But even these tempered requirements are too much for those solution providers that need to quickly acquire and resell Oracle product licenses to small businesses at a very low cost and with few (if any) hassles.

New Two-pronged Approach for Small Businesses

With the belief that the lower end of the SMB market represents a $1 billion (USD) opportunity worldwide, Oracle recently decided to render itself as easy for partners to deal with as Microsoft and Symantec (a good no-frills example in the security segment) have been.

To that end, mid-2007, Oracle announced the Oracle VAD Remarketer Program for its 1-Click Ordering Programs. This global program allows authorized Oracle VADs to resell Oracle 1-Click Ordering Programs through new resellers, without requiring them to join OPN or to pay the upfront fees and sign contracts with Oracle. In other words, resellers can now transact Oracle business as remarketers through any authorized Oracle VAD, and leverage that VAD for support, training, and other reseller services.

Remarketer is a new class of Oracle reseller that is not directly affiliated with Oracle and that is able to resell Oracle 1-Click Technology products only, under standard terms, conditions, and pricing. While there are no OPN fees, there are no OPN benefits either, and some remarketers may find, over time, that they would like to upgrade and join the Oracle partner network to receive related benefits, such as direct Oracle support assistance, discounts on training, and free software downloads. Oracle’s offering of more flexible choice to partners so that they can determine their best growth path for their business is certainly commendable.

Eventually, a partner can sign an Oracle Distribution Agreement to become a value-added reseller (VAR) and deliver a full range of Oracle offerings, including Oracle Enterprise Edition products. The Remarketer Program is available only through authorized VADs. Remarketers leverage a VAD for all support, training, etc., and no support comes directly from Oracle. Oracle hopes to see the ranks of its North American partners, currently numbering in the hundreds, increase to the thousands via the Remarketer category.

At the same time, Oracle unveiled a streamlined "ORACLE 1-CLICK ORDERING" process that should assist partners and customers to more easily resell and purchase selected Oracle 1-Click Ordering Programs. With this, Oracle has broadened access to its 1-Click Ordering Programs to thousands of new resellers and customers. ORACLE 1-CLICK ORDERING process should greatly reduce the amount of time it takes to book and fulfill an order for these products, currently defined as Oracle Database 10g Standard Edition and Standard Edition One; Oracle Application Server Java Edition, Standard Edition and Standard Edition One; and Oracle Business Intelligence Standard Edition and Standard Edition One.

By identifying that a small-volume order for resale is for Oracle 1-Click Ordering Programs, a new process is initiated, via a partner portal, that triggers an order entry number and URL to be sent back to the purchaser. The purchaser can then choose either an online or a physical order fulfillment. If electronic fulfillment is elected, the purchaser can download the software, type in an order entry number, and receive the product after clicking through simplified terms and conditions. If physical fulfillment is chosen, the purchaser will receive a media kit comprising a DVD that includes Oracle Database 10g, or Oracle Application Server with binaries for the Microsoft Windows operating system and for the Linux operating system, thereby enabling customer choice. Also in the box will be Oracle's Terms & Conditions, which will be agreed to with the opening of the package.

This new order fulfillment process should shorten the fulfillment cycle time from a few weeks to less than a day, because it eliminates the cumbersome Oracle License Service Agreement (OLSA). It should also increase profitability for partners by eliminating the administrative back-and-forth once needed to sign extended contracts and shepherd the fulfillment process itself. In summary, the program increases partners’ transaction profitability, reduces barriers to entry, and shortens the booking cycle to a single day.

With this two-pronged approach, Oracle hopes to recruit a new class of resellers that have no direct affiliation with the vendor. The program is not only designed to be a zero-barrier-to-entry solution for new resellers, but also to entice resellers that once abandoned Oracle because of channel conflict to return. Instead of dealing directly with Oracle, small solution providers will purchase software licenses from designated VADs and receive all training and support from them. In North America, Oracle has tapped Ingram Micro, Tech Data, and Arrow Enterprise Computing Solutions as its authorized distributors for the VAD Remarketer program.

Some of these distributors are launching their own programs around the VAD Remarketer effort, which typically entail their infrastructure availability, presales resources, and marketing help for resellers. For instance, Tech Data, based in Clearwater, Florida (US), recently unveiled the “Go 'n Grow” VAR recruitment and enablement initiative, which will offer sales, technical, and educational support to VARs that enlist in the program, including direct mail campaigns and telemarketing assistance, technical Webinars, and access to Tech Data's 4,500-square-foot TDSolutions Center for demonstrating Oracle-based solutions to prospective customers. Ingram Micro works along similar lines, also offering sales incentives to resellers too. Future steps in the triangulation process might include independent software vendors (ISV) involvement and a solution catalog search capability for all parties. Triangulation is when Oracle works in combination with two other partners. For example, Oracle combines its software with Hewlett-Packard hardware through a sales channel, such as Tech Data, which acting as a VAD.

The VADs’ hope is that the program will change the sales volume dramatically, while there might be immediate sale opportunities (with better margins on software resale) for all partners, and with much less direct competition from other VARs. The flexible partner program offers to all three parties (i.e., Oracle, VADs, and remarketers) better opportunities for future business, and to acquire and nurture customers for life with a greater services opportunity. Partners that also acquire credible enterprise-level skill sets can also hope for a competitive differentiation and a greater up-sell opportunity within Oracle’s continually expanding portfolio.

This is part one of the two-part series A "Gentler" Giant's Success in Reaching Out to the "Little Guys." Part two takes a closer look at Oracle's offerings for SMBs and at its partner-friendly initiatives and programs.

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