A return to operating profit prompts many questions about the Sybase strategy. Its switch to an indirect model may seem like St Paul?s conversion on the road to Damascus but there are solid business reasons why the company has made the switch. Although it joins a long list of vendors that have suddenly discovered the advantages of having a channel rather than selling direct, the move is likely to prove something of an uphill struggle.
Mitchell Kertzmann, CEO of the company, toppled Mark Hoffman in a boardroom coup earlier this year, and the fact Sybase shows signs of turning round does paint a picture of some disarray in the boardroom. The results show turnover up to $250.2 million for its third quarter but the figures include an operating charge of nearly $50 million. If you are a clever financial player, you can subtract a restructuring charge of $52.6 million and demonstrate to Wall Street, major Sybase users, that you are in the black.
Pierre Violo, appointed as European vice president charged with putting 40 per cent of Sybase?s business through an indirect model by the end of next year, says that the company will change its incentive schemes for its salesmen to compensate them for pushing business indirectly. He agrees that the company will need to persuade resellers that it is serious. Yet he insists that its policy of selecting specific vertical markets including retail and health will deliver financial rewards for the channel he will set up.
But Allen Swann, alliances director at Oracle UK, disagrees. He thinks Sybase has left it a bit late. "They?ve got to do something but the channel isn?t looking for reduced market share," he says. Oracle was in the position two years ago where it sold almost completely direct and Swann acknowledges that it has taken that long to make the relationships work.
"They could achieve their 40 per cent objectives but partners want to see growth and it?s no good being 40 per cent of a stagnant pond," he says. Swann finds himself in a position where he uses Azlan and Sphinx Level 5. When Sybase was contemplating going the indirect route last year, it was a cat?s whisker away from signing Sphinx as a distributor.
One of the problems is that Sybase and Powersoft had different business models before they merged. Colin Tenwick, managing director of Sybase UK, came from Powersoft, as did freshly spawned CEO Mitchell Kertzmann. There always was an internal conflict, after the merger, between the direct and indirect models, which the company had to resolve.
That led to an effective coup d?etat three months ago when Kertzmann, who started Powersoft, took over the reigns at Sybase, deposing founder Mark Hoffman. Powersoft had managed to persuade many corporate clients to use its products rather than the ubiquitous MS Visual Basic. Tools, it seems, are an important component of every vendors? strategy.
Kertzman seems pragmatic. He told analysts earlier this week that as he had a large shareholding because of the earlier merger, it was definitely in his interests to turn the company around.
Nor will he sell Sybase, he insisted. Despite the rumours and poor results which pulled the share price down to an attractive proposition in the last quarter, he said: "No one will take us in a hostile way." US rules don?t preclude dawn raids yet Kertzman is adamant Sybase will grow.
Its move to an indirect channel is a reflection of his continuing grip on the company.
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