Sun, Tech Data End Distribution Pact

When Sun Microsystems struck an SMB-focused distribution agreement with Tech Data in the summer of 2003, it was somewhat of a novelty. Whereas today it has become common to see vendors such as Oracle and Cisco Systems strike distribution agreements to reach the SMB market, Sun's partnership with Tech Data came before the trend had truly taken off.

But despite being ahead of the curve two-and-half years ago, Sun and Tech Data have agreed to terminate their pact and go their separate ways. It was hardly a surprise; officials at both companies say the partnership never generated a significant amount of business. For Tech Data, only a small number of resellers had embraced Sun's move to the midmarket. While the prospect of selling Sun's entry-level servers with AMD's Opteron and Sun's Sparc chips may have looked good on paper--Tech Data even added Sun's entire software suite, including Java Enterprise System and Java Desktop System, last summer--the plan never lived up to expectations.

Bob O'Malley, senior vice president of marketing at Tech Data, says the decision to end the distribution agreement was mutual. "It just wasn't going to be that big of a business for us," O'Malley says. "Sun came to us about three months ago to talk about the partnership, and it was very much an open discussion. At the end of the day, we decided to part ways amicably."

Tech Data and Sun have created a transition plan for its reseller customers to migrate to Sun's top distributors, Arrow's MOCA division and Access Distribution. Sun will continue to focus on the midmarket, and its Opteron-based midrange and entry-levels servers are growing rapidly. The computer-maker reported a 106 percent increase in shipments for its Sun Fire Opteron-based servers in its first fiscal quarter, which ended Sept. 25. However, Tech Data and Sun never found the right audience or approach for the products.

"Tech Data was focused on some interesting segments that Sun does not participate in--the SMBs to a large extent," says Graham Lovell, senior director of x64 servers at Sun. "We are really focused on the enterprise market space and so, therefore, that could have been something that was not advantageous for both companies."Tech Data, meanwhile, has shifted its attention to other vendors, most notably Apple (see "The Apple of Tech Data's Eye?" Dec. 5, page 20, and on www.varbusiness.com). Plus, O'Malley says interest in SMB resellers is still high in the vendor community.

"We've seen a renewed and vigorous interest in the SMB market from companies like Hewlett-Packard, IBM and even Apple," O'Malley says. "We don't think there will be a gap in our product line because of this decision."

With the continuing trend of enterprise vendors moving down to the SMB market, O'Malley says there could be a time in the near future when Tech Data and Sun give it another shot.

"There's still some potential down the road," he says. "Maybe Sun will make an acquisition in SMB technology that puts them back in our lap, or we may make an acquisition to get into the Sun business."