Sun Changes The Rules

Sun Microsystems is moving swiftly to restructure its channel in an aggressive bid to conduct all U.S.
Written by Deborah Gage, Contributor
Sun Microsystems is moving swiftly to restructure its channel in an aggressive bid to conduct all U.S. sales over the Web by June. The effort includes a mad scramble to partner with leading Web integrators like iXL and Zefer, and thereby head off rival vendors on the e-business front.

Sun, like many other vendors, is engaged in a complex dance as it balances new partners against the old, all the while trying to Web-enable itself.

Sun officials confirm that they visited resellers last week to discuss a plan to terminate all reseller contracts. But the news wasn't all bad for loyal partners: In lieu of the old contracts, Sun is offering resellers the opportunity to become national integrators. To qualify, integrators must offer a 24 x 7 help desk and employ 15 Sun-certified engineers. National integrators can sell products and services outside their 200-mile geographical radius and over the Web, if they can physically install equipment regardless of a customer's location.

The Big Guns

Sun officials also confirm that Sun CEO Scott McNealy and Sun president Ed Zander entertained 45 executives from iXL, Zefer and other "e-integrators" at an "I-Leader" retreat this month.

Until now, many Web integrators have mostly been platform-neutral. But Sun, Hewlett-Packard, IBM, Microsoft and other high-tech heavyweights are trying to steer Web integrators toward their respective platforms.

The stakes certainly are high. A vendor that builds strong brand loyalty with Web integrators stands to corner the emerging e-business channel.

Still, the effort won't be easy. Sun admits that Web integrators have different needs than traditional resellers.

"What we really learned is that you can't give them [Web integrators] a program in a box," says Sun marketing director Bill Cate. "They want close relationships with our direct sales force and our infrastructure resellers, access to quality training and education, and access to Sun technology. They're also interested in co-marketing and branding. We're sitting down with each of them now to design unique, individual business plans."

Sun has created six categories of partners and will put all of them under a single contract, with addendums to cover each type. Categories include regional, national and global systems partners; government systems partners; national solutions partners that create their own intellectual property on top of the Sun infrastructure; and the e-integrators.

On The Bubble

Distributors' roles are less clear in Sun's new channel. In some respects, they will become warehouses and financial shelters for Sun's partners. For example, distributors will take title to hardware so partners can keep it off their books. Sun believes that will make partners look better to Wall Street, should they decide to go public.

That appears to be the goal at the Merisel Open Computing Alliance (MOCA). Sources say MOCA is preparing to separate financially from the rest of Merisel, which could be a prelude to MOCA becoming a separate entity. Cate says distributors will be coming up with interesting services within the next few months.

Sugar Daddy

Sun also is investing resources in selected dot-com start-ups, reasoning that some could become partners. For example, although Sun claims relationships with more than 250 start-ups, it will co-market and co-sell services and technology with Found.com and says other similar relationships are coming.

Found.com bridges the online and brick-and-mortar worlds by allowing customers to purchase products over the Web through a specific register in a specific physical store.

"We're building our internal infrastructure on Sun and requiring all the retailers in our network to put in Sun Netra servers," says Found.com CEO Richard Lawson. "We Web-enable existing point-of-sale and inventory-management systems, and employ complex searching and spidering technology. No one was tying in retailers' stores with a dot.com presence."

As for Sun's old-guard resellers, sources estimate that about 70 of Sun's 500-plus partners will qualify to become national integrators. Whatever the actual number, partners expect the usual friction over who will control Sun's prized "named accounts," which tend to be Fortune 500 companies.

"It's a difficult program to engineer, but if done properly it could be very positive," says Norm Shockley Jr., CEO of Acclaim Technology, which will become a Sun national integrator.

Another integrator that is going national plans to recruit new hires from those resellers that can't meet Sun's new partner criteria. "The way Sun is organized, the big will get bigger. Becoming a national integrator changes the game," that integrator says.

Prepare for a shakeout.

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