Creating Profit Through Alliances - business models for collaboration E-book | Page 69

In a number of industries such as IT, the large and lengthy sales processes make it customary to offer additional discounts on the purchasing price to the distributor that first discovers and registers a sales opportunity in the supplier's administrative system. This allows supplier and distributor to respond more effectively to an opportunity, for instance by approaching the buyer even before he issues a Request for Proposal. This discount, which is for that one distributor exclusively, enables him to reduce his price even further and so to increase his chance of winning the order, or to better maintain his own margin. With Oracle, for example, this discount is 5% but only applies if the order is confirmed within six months after registration. A number of preconditions need to be observed for these types of price structures to work properly:    The price structure must be established beforehand and be entirely transparent. Differences between distributors may occur, but they need to be objectifiable: it is fine for a certain distributor to obtain an additional discount for a large volume or on account of a specific agreement, but then this should, in principle, be attainable for other distributors. Any channel conflicts must be tended to: it should not be possible to obtain a greater discount via a longer or different channel, on the basis of certain agreements, then when making the purchase as directly as possible from the supplier. The supplier should carefully define the application of any exceptional arrangements. A good example is how Oracle operates. As one of the largest software suppliers worldwide (and also of hardware, since its takeover of Sun), Oracle has developed an elaborate policy that is, for the most part, open to examination by third parties. The Oracle Partner Network consists of three membership levels -- Silver, Gold and Platinum -- that are each associated with different demands and different annual contributions. Partners are supported in different aspects, including an unlimited number of demonstration licences or development licences, access to knowledge databases, and certain forms of technical support. Partners may use the Oracle logo and can specialise in certain competences. Partners can move up through the membership levels based on their development of certain competences to a certain level, the number of successful implementations, and the number of leads contributed. The amount of technical and marketing support increases accordingly, as does the discount offered when purchasing licences. Oracle collaborates with partners/distributors according to two models:   Reselling: the turnover is recorded in the partner's bookkeeping Co-selling: the partner advises but does not sell licences, which need to be purchased directly from Oracle. Oracle applies an „open market model‟: all distribution channels are given the same discount on the standard price list. A distributor gets a 30% to 40% discount, depending on the turnover. Higher discounts may be offered if Oracle is directly involved in a deal, but the principle remains that partners need to achieve a margin of at least 5% on the resale of licences. When a customer buys Oracle licences, he is given an Unlimited Licence Agreement, including the right to upgrades and support. The discount applies to the entire package, in terms of the purchase as well as support. Support is always 22% of the purchasing 67