Sun comes around on channelling middlemen

FOR two decades, many of the most fiercely contested battles between major IT vendors have been over differing strategies for selling to (and supporting) customers.

Contrary to its reputation, Sun has always relied to an extent on the channel

Is it more effective to sell directly or indirectly?

Do channel partners really add value and extend reach, or are they just another layer of costly middlemen?

The latest important shift in this long-running chess game has just come from Sun Microsystems, which in the US has decided to hand off all deals with anyone except its 300 largest customers to the firm's channel partners from next quarter on.

Contrary to its reputation, Sun has always relied to an extent on the channel.

But the company's heyday in the 1990s was far more about an aggressive direct sales force wrapping up large and lucrative end-to-end deals that weren't shared with anyone if Sun could help it.

Of course those days are long gone (which is one reason why Sun's growth and share prices have lagged those of rivals such as IBM and Hewlett-Packard since the dotcom bubble burst).

The planned transition is still an unexpected and arguably risky plan - particularly since Sun has traditionally been less effective than its peers at providing the appropriate support and resources to make channel partners successful, especially at less-transactional activities such as providing ongoing support and service.

And many of the best value-added resellers have relationships with multiple large vendors, meaning Sun will have to fight for attention and deal flow with IBM, HP, Dell and EMC within these resellers.

The Sun plan is another indication of the struggle all large IT vendors are having in finding an economically-viable way to address the medium-sized enterprise market, where deals are often too small to support a traditional high-end direct sales model, but also don't necessarily fit a mass-market or commodity approach.

Particularly since the emergence of the internet, the disintermediation model pioneered by Dell - sell items assembled to order from standard components, cutting out both the middle man and the need for a customer-facing sales presence - has tended to prevail in many consumer and small business markets, although Apple has recently reversed conventional thinking in this area with its retail outlets.

However, for all but the smallest business IT users, channel partners such as value-added resellers, software vendors and (at the high end) system integrators have remained part of the picture.

Diverse user requirements, greater tailoring and customisation of solutions than in the consumer market, and a resulting need in many cases to assemble components sourced from multiple vendors have dictated against the classic Dell model.

Yet as any reseller knows, big vendors are often tempted (particularly in tough economic times) to swoop in and grab big deals from their partners, since they make a lot more money selling directly to such customers than selling through the channel.

In this context, by drawing a very clear line between which customers are dealt with directly and which are sold to through the channel, Sun may help itself as long as it sticks to the deal.

At another level, the Sun move should also be viewed as the company practising what it is preaching in terms of the long-term trends in IT.

Sun is on record as saying that the IT market is bifurcating into a very small number of hugely-intensive and fast-growing IT users (such as major global financial, telecom, internet or pharmaceutical firms) and a huge mass of IT users with far more standardised, slow-growing, commodified needs.

If this really is the future, then it totally makes sense for Sun to focus its efforts on the former.

But it might want to keep quiet about why it doesn't want to deal with the latter any more, at least while it shuffles them off to its channel partners.