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Sun Microsystems revamps incentives to encourage partners to go deeper

With a majority of Sun Canada's business now flowing through the channel, the focus for 2009 is delivering stable, long-term earning opportunities to committed partners

Following a significant rationalization of its channel program in 2008 that saw 17 partners dropped and another 20 recruited, Sun Microsystems of Canada (NASDAQ: JAVA) is focusing on creating long-term opportunity for committed partners through increased investment in 2009.

John Cammalleri, vice-president of channels and alliances with Sun Canada, said the vendor has no interest in a passive channel community. It wants an active and engaged channel that will both challenge Sun and invest in the relationship, because that’s how you achieve growth. In exchange, Cammalleri said Sun is offering its partners predictability, visibility and flexibility.

“You can’t be in the channel business short-term. You need to be predictable, and provide growth opportunities over time,” said Cammalleri. “There is going to be competition (amongst VARs). But at the same time, you need to provide your partners a platform where they can differentiate themselves.”

According to Cammalleri, Sun increased its channel investment by 40 per cent in 2008, and in 2009 it expects to grow its channel business by 10-15 per cent, year over year. The vendor has some 120 partners in Canada, including SIs, VARs, ISVs and distributors, who he said are seeing strong growth in particular in the CMT and x64 spaces.

“One of the key value-propositions for the Sun channel is that we don’t have a lot of partners,” said Cammalleri, noting Sun recently dropped 17 partners from the program and added another 20 in key areas. “We’re a small community of very committed, talented partners, and that’s a plus for VARs. We want the right partners with the right focus. We want to create a tight ecosystem where they can build sustainable revenue streams over time.”

Sun Canada president Andy Canham said the vendor is relying on the channel to help it meet its growth projections, and to get there it’s investing in its Sun Partner Advantage Program and is adopting a “partner first” strategy.

“We’ve gone out of our way to make sure our sales team compensation is completely neutral, so we’re not driving sales reps one way or another,” said Canham on direct/indirect conflict. “The savvy sales rep will make good use of partners…there’s all kinds of value having the partner selling with you and working with you on the account.”

To reward and incent partners, in addition to a doubling of its channel investment year over year, Cammalleri said Sun has re-worked teaming agreements to reward partner value and investment in opportunities, and has expanded its inventive program geared toward encouraging partners to bring new customers to Sun.

Sun has also changed the definition of net new customers under its incentive program to include current customers working with Sun in storage, for example, but not in servers. Under the change, designed to help the channel increase attach rates, partners that expand their customers’ Sun footprints in this way will be eligible for net new customer margins of 10-15 per cent over and above the existing margin opportunities on the sale.

“We really encourage our partners to find new customers for Sun,” said Cammalleri. “The program really does encourage our partners where we may have a very strong base to attach new products, and find new customers.”

Paul Edwards, director, Canadian SMB and channels research with IDC Canada, said Sun’s move to expand incentives to drive partner attach rates and encourage partners to go deeper with current clients is a good bet for achieving growth in a challenging market.

“Because they’re a captive audience if you will, partners should have a good relationship with their current clients, and be in a good position to cross-sell,” said Edwards. “In the bad economic environment that we’re in, it’s more important to increase the footprint with current customers than to het out and find new customers.”

For a partner currently specializing in storage to move into servers, or vice versa, shouldn’t pose a significant challenge as both are in the infrastructure layer, said Edwards. Where it gets more difficult is when partners move beyond infrastructure into areas such as applications, which require a different sales process that may need approval higher-up in the client organization.

“It’s a key building-block for partners today to start building their consulting expertise, because the decision-making authority (on IT purchasing) is rising higher in many organizations,” said Edwards.

Speaking more broadly, Edwards said with Sun having a relatively small number of partners, cutting 17 from the program was a significant move. There were obviously some issues around maintaining partner focus on transactions, and he said the focus on quantity over quantity makes sense, with Sun planning to grow its channel capacity responsibly along with the market opportunity.