It was clear that with the acquisition of Sun Microsystems Oracle Corp. will not only transform itself, but will also re-shape the world or corporate software and servers. At present the company is boosting its own direct sales channels to depend less on resellers, but such a move causes its partners to start working with direct rivals, Hewlett-Packard and IBM. Oracle admits, that its direct/mixed sales strategy may not pay off.
Oracle makes no secret that it not only plans to transit to a mixed direct and indirect sales model, but wants larger portion of sales to be direct. Naturally, it has all reasons to expect its relationships with partners to worsen and if its strategy is not successful and/or its rivals manage to be more successful as a result of strategic partnerships with the company's partners or major acquisitions, Oracle's financial results will be affected negatively. In fact, the company has just officially warned about such possibilities in its filing with the SEC.
"Although we will continue to sell our hardware systems products through indirect channels, including independent distributors and value added resellers, we have enhanced our direct sales coverage for our hardware products and intend that our direct sales force will sell a larger portion of our hardware products in the future than they do now. [...] Our relationships with some of our channel partners may deteriorate because we are reducing our reliance on some of these partners for sales of our hardware products, are modifying our approach and timing to the manufacturing of our products and are altering certain of Sun’s legacy business practices with these channel partners, which could result in reduced demand from the channel partners or certain customer segments serviced by these channel partners," the entry reads.
Oracle admits that there are risks that its direct/indirect sales model many not earn similar revenue as its current business model, which means declines in sales.
"Some hardware revenues from channel partners may not be replaced by revenues generated from our own sales personnel or may not be replaced as quickly as we expect. [...] Even if we can meet our [sales personnel] hiring needs, these salespeople may not be able to achieve our sales forecasts for our hardware business. If we experience any of these risks, our hardware revenues or profits may decline," the entry claims.
Some of the company's partners are already considering switching to HP and IBM when it comes to hardware. Naturally, they are unhappy with the fact that Oracle is essentially stealing their business.
"They've already started getting rid of partners. Oracle is saying it's going more direct? Just ask Oracle how they're doing. It sounds like pure stupidity. Oracle could rebuild their partner base. They have all their software customers we work with. When customers' software renewals come up, we could help talk to them about the hardware. Or Oracle could do it direct. But guess what? We are in there now with other vendor partners. We can ask customers, 'Have you seen the Oracle roadmap? No growth? Well, have you seen the HP roadmap? The IBM roadmap?' If Oracle had brought us in first, we'd be singing, 'Kumbaya, Oracle'," said one of Oracle's partners, a solution provider, in an interview with CRN web-site.
Oracle also confesses that its effort to get rid of smaller partners may play a bad joke with it and its revenues will drop.
"Our software indirect channel network is comprised primarily of resellers, system integrators/implementers, consultants, education providers, internet service providers, network integrators and independent software vendors. Our relationships with these channel participants are important elements of our software marketing and sales efforts. Our financial results could be adversely affected if our contracts with channel participants were terminated, if our relationships with channel participants were to deteriorate, if any of our competitors enter into strategic relationships with or acquire a significant channel participant or if the financial condition of our channel participants were to weaken. There can be no assurance that we will be successful in maintaining, expanding or developing our relationships with channel participants. If we are not successful, we may lose sales opportunities, customers and revenues," Oracle concludes.