Oracle-Sun Ends HDS Storage Agreement

Oracle and storage vendor Hitachi Data Systems are ending the long-term reseller agreement HDS originally had with Sun in a move that could cause customer confusion but will probably mean channel opportunities.

The dissolution of the storage agreement between Oracle and HDS, the latest fallout from Oracle's acquisition in January of Sun, is also seen as the latest sign that vendor consolidation into a small number of companies looking to control their hardware and software stacks is continuing.

HDS on Tuesday told its solution providers via an e-mail that the reseller agreement it signed with Sun nine years ago will end on March 31.

In the e-mail, a copy of which was reviewed by Channelweb.com, HDS wrote that, with Oracle's acquisition of Sun Microsystems, HDS and Oracle agree the time is right for the relationship to evolve.

"We are jointly determining the positioning of the products and solutions based on Hitachi Data Systems that you have deployed with clients. We understand you and your customers have questions and concerns surrounding service obligations to the global install base moving forward," HDS wrote.

HDS also said it will provide "solid transition programs" to its partners to ensure its storage solutions continue to be available to partners and their customers under the Hitachi Data Systems brand name.

"A new chapter is here, and Hitachi Data Systems sees great opportunities for you that will materialize in the market," HDS wrote.

Solution providers agree that the split means opportunities for them.

When Greg Knieriemen, vice president of marketing at Chi Corp., a Cleveland, Ohio-based solution provider and HDS partner, first heard the news, his first concern was that Oracle-Sun customers receive continued support from the storage vendor.

"But this is also an opportunity, a golden opportunity, for HDS partners like Chi to go in and service Sun-HDS customers," Knieriemen said. "We'll be looking to take some business from Sun partners."

The abrupt nature of the break and the fact that HDS and not Oracle broke the news first are two interesting questions partners have, Knieriemen said.

"Even if HDS broke the agreement off, you'd think Oracle would be scrambling to get in front of the news," he said.

John Varel, CEO of FusionStorm, a San Francisco-based solution provider and partner to Oracle, Sun, and Hewlett-Packard, which OEMs the same HDS products that Sun resells, said the Oracle-HDS break is one of the things that make this an exciting time to be in the channel.

"This means nothing but opportunity for partners with broad offerings," Varel said. "If a customer is upset with Sun-Oracle, we'll give them HP."

Varel said he is surprised the break didn't happen sooner.

"It was inevitable," he said. "It's a part of the consolidation in this industry. We're seeing a splitting of the righteous teaming of vendors as everybody wants to control everything. Look at HP and EDS, at Oracle and Sun, at Dell and Perot. It's a changing world, and it's disruptive."

Yet while the industry consolidates towards a handful of vendors trying to offer the complete hardware-software-services stack, Varel said it is easy to forget that customers still have alternatives, and that savvy solution providers still have the upper hand.

"We're holding higher margins on our product sales now than ever before because we bring customers broad solutions," he said. "Customers will go with the group, the manufacturers and solution providers combined, that provides them with the best ROI. We don't sit around asking customers, how much hardware did you buy last year? They don't care."

Knieriemen also sees the Oracle-HDS split as another part of the on-going vendor consolidation push.

"As you listen to (Oracle CEO) Larry Ellison lay out his vision of the future, it's based on a complete Oracle-Sun software-hardware stack," he said. "So this shouldn't be a shock. This is the tone Oracle is setting. They want a vertical stack, where everything is theirs."

The impact of the break is lessened because of the fact that the Hitachi product has been available from Hitachi's direct and indirect sales teams, from Sun under the reseller agreement, and from HP under an OEM agreement, said Dave Cerniglia, president of Consiliant Technologies, an Irvine, Calif.-based solution provider and storage partner with Hitachi and Sun.

"No matter whether customers buy it from Hitachi, Sun, or HP, they are buying the Hitachi name and reliability," Cerniglia said. "Customers who bought through Sun did so for convenience. they got volume discounts, or bundled the storage with servers. The Hitachi sales force looked at Sun as a value-added reseller."

In fact, Cerniglia said, there will probably be little impact in the part of the storage market HDS relies on the most: the enterprise.

"Hitachi still has a direct sales force, and a channel," he said. "And they are dealing in the enterprise where competition is much less than in the midrange. There are really only three enterprise storage players: EMC, IBM, and Hitachi."

Next: The HDS Message To Partners

Here is the text of the March 2 email from HDS to its solution provider partners:

"Dear Valued Partner,

"Due to the recent acquisition of Sun Microsystems by Oracle Corporation, there has been much speculation as to the effect the merger will have on the market, product offerings and partnerships. As you are aware, Hitachi Data Systems and Sun Microsystems have enjoyed a successful business partnership. On March 31, 2010, the current distribution agreement that Hitachi Data Systems and Sun Microsystems have been jointly operating under for the past nine years will come to an end.

"This relationship has given our partners access to industry-leading storage solutions built on Hitachi technology on which many of the world's top enterprises have come to rely. With the acquisition of Sun Microsystems, Hitachi Data Systems and Oracle agree that the time is right to evolve this relationship into one reflecting the priorities of the new company. We are jointly determining the positioning of the products and solutions based on Hitachi Data Systems that you have deployed with clients. We understand you and your customers have questions and concerns surrounding service obligations to the global install base moving forward.

"Hitachi Data Systems will be answering all questions and concerns with solid transition programs and will focus on meeting the demands of the continued excitement in the marketplace around the Hitachi Data Systems technology and the unique leading edge solutions that the Hitachi Data Systems brand has, and will continue to bring to market. These solutions will continue to be made available to you and your customers under the Hitachi Data Systems brand name.

"Details will be forthcoming on programs and processes that will help guide you and your customers, as we transition this business moving forward. A new chapter is here, and Hitachi Data Systems sees great opportunities for you that will materialize in the market. Protecting, developing and growing your business is our top priority."

Neither HDS nor Oracle were able to respond in time to questions about this story. However, a source close to Oracle said that the two companies were still negotiating their agreement.