Oracle Cuts Former Sun Partners From Maintenance Renewals Business

Responding to complaints from legacy Sun Microsystems solution providers that Oracle has cut off their maintenance renewals business, Oracle said that it did so in order to cut what it called a business with no value-add which was abused by many Sun partners.

Oracle's decision to eliminate the sales of renewal contracts for Sun hardware sold by solution providers caught those solution providers by surprise and is causing many of them to question Oracle's commitment to building a hardware channel.

The cuts are only the latest in a list of complaints from legacy Sun solution providers who are finding it more difficult to work with Oracle than expected. The ex-Sun partners are in the process of migrating to Oracle's channel program in the wake of Oracle's acquisition of Sun, which closed in January.

Several legacy Sun solution providers told CRN on condition of anonymity that Oracle eliminated the maintenance renewals business of all but about 20 of them without notice.

As a result, they have been cut of from what had been one of the more lucrative parts of their business before Sun was acquired.

Next: Cutting The Renewals Business With No Advance Notice

One solution provider only found out about the change when he couldn't get Oracle to provide pricing information or even respond to requests for information despite repeated attempts to get information from his Oracle sales rep. That solution provider's customers also told him that they were being contacted by Oracle directly to discuss renewals.

Another solution provider said that his company's renewals business went from good to zero immediately after Sun was acquired by Oracle.

The solution providers said Oracle is applying a typical software renewals model, where the vendor handles renewals directly, and applying it to its new hardware business.

In the process, Oracle is risking its nascent hardware business by taking away the opportunity for its experienced solution providers to talk to customers not only about renewals but also new hardware sales and upgrades that come from such conversations.

"They're applying a software model to a hardware business," the solution provider said. "That's difficult to do when they have only a 5 percent market share in the hardware business."

Next: Oracle Calls Renewals A "Culture" Issue

Judson Althoff, senior vice president for Oracle's worldwide alliances and channels and embedded sales, said that the change came about because of the differences between how Sun and Oracle handled the renewals business.

Under Sun, most of the renewals were handled through the channel, while Oracle handles about 98 percent of its customers' renewals direct, Althoff said.

"It's part of our culture," he said. "We do the sale and the first year of maintenance through the channel, and then handle renewals after that directly."

Maintenance contracts are tied to upgrades of the software, and software that runs on hardware when upgraded is a part of maintenance, Althoff said.

"When we brought Sun into Oracle, we decided to adopt our model," he said. "When we looked at the renewals, we decided to do it direct so we could centrally manage it and increase the attach rate."

Next: Oracle Says It's Cutting Business With No Value-Add

If ex-Sun solution providers are adding value as part of their renewals business, Oracle would let them handle it, Althoff said. However, he said, the majority of those partners are really only delivering renewals, and not bringing in new business as a result, he said.

"There's not enough business in the Sun hardware partner community to support renewals-only VARs," he said.

Althoff admitted that only 20 legacy Sun solution providers are participating in the renewals business.

"There's not a lot of value you can add to the renewals process," he said. "It's just a phone contact: 'Hi, would you like to renew?'"