Oracles Top Priority: Channel Repair

Updated: Despite Oracle's success in getting PeopleSoft shareholders to tender their stock, many say the company must lavish more care on customers and partners to prosper.

Now that Oracle has made its midnight announcement, its possible to regain some perspective. In the end, the most important thing for Oracle customers is not necessarily that PeopleSoft shareholders voted with their shares, deciding by close of business day Friday that a majority wanted to see their company engage in a proxy battle with Oracle.

What matters more is that the uncertainty is over—uncertainty being something the marketplace emphatically does not like.

Some blame Oracles dogged pursuit of PeopleSoft for its weak applications sales, comparing the situation to the scenario that would have played out had John Kerry challenged the election results and dragged the country through the courts or demanded recounts. As goes the nations economy, so goes the technology economy: both are extremely adverse to uncertainty.

Others say that Oracle must pay closer attention to customers and partners needs, regardless of the outcome of the PeopleSoft battle, if the company is going to push forward in the marketplace.

Indeed, one Oracle value-added reseller said the biggest challenge now facing Oracle is to figure out how to be more channel-friendly.

The VAR is in the business of negotiating Oracle licensing on behalf of customers. It claims it is one of Oracles largest VARs, overshadowed only by Dell Inc.—a surprising yet telling fact, given that it has only 10 employees.

Why is such a small company one of Oracles largest VARs? Because Oracle has a history of being extremely difficult to work with, the president of the VAR said. "They dont have an abundance of good partners who focus on Oracle, because Oracles such a challenge to deal with."

Oracle is known to be difficult to deal with for two reasons: First, the companys sales compensation plan is not neutral to source of sales. Second, Oracles rules of engagement dont rule out competition with partners.


Read more here about Oracles call to PeopleSoft management following the midnight deadline for PeopleSoft shareholders to tender stock.

Whereas companies such as IBM and Cisco Systems compensate their sales staff by the same amount whether a sale goes through a partner or whether it goes direct, Oracle sales staff work on commission—and they take this seriously.

"It costs [Oracle] sales reps money if a deal goes down other than direct [sales from Oracle]," the VAR said. "It often pits us against each other in the marketplace. As much as were partners, were competitors. In that, way too much time is being spent by Oracle reps and by partners, convincing customers who to buy from rather than what to buy."

Rather than spending time to understand customer needs and fulfilling requirements, the VARs reps spend time ensuring that customers will buy from them. "Over the past week and a half, every [one of our reps] said, I spend most of my time negotiating and dealing with Oracle rather than selling to customers. Its not finding the customers and the needs and selling Oracle—its the time I have to spend dealing with Oracle. Its just not worth it.

"Thats a problem to Oracle if they dont recognize that its all about the number of feet on the street, the number of phone dials to the customer," the VAR said.

Oracle is now working to change the situation. In August, Rauline Ochs, group vice president of Oracles North America Alliances and Channels, unveiled a program called "Cover the Subsidiaries." The program was designed to allow Oracles 2,800 North American partners to sell their goods and services to subsidiaries of Oracles biggest, most strategic accounts.

Have programs like this worked? Although the VAR president hasnt participated in the Subsidiaries program, he gives the strategy mixed marks.

"If youre in a major accident with a vein thats cut and bleeding profusely and someone puts a little Band-Aid on your hand, you say, Thanks for that, but I need priority for where Im gushing blood," the VAR president said. "Until someone puts their foot down and says, This is costing us in the marketplace. Look at our customer satisfaction, look at what theyre saying about the sales experience," Oracle will still suffer in the market, he said.

"Im not bashing Oracle," he said. "I just dont know how to make that change. I dont know how to make that organization and those executives understand the cost to the marketplace, the cost to me when I cant make my reps productive because theyre constantly channel-conflicted."

Write to me at Associate Editor Lisa Vaas has written about enterprise applications since 1997.

Editors Note: This story was updated to correctly identify the quoted source as a VAR.


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