Sun's Sitka gives resellers cut when user expands net

Electronic News, April 27, 1992

SAN FRANCISCO -- In an aggressive move to boost its share of the PC networking market, Sun Microsystems subsidiary Sitka Corp. last week kicked off a marketing scheme that gives resellers a cut of the profits each time an end-user expands his network.

Sitka's "Customer for Life" program is intended to increase market share by encouraging resellers to win and support customers for its 10Net network operating system. Sitka also hopes to attract customers by giving away the software needed to establish a network.

"Currently the reseller invests a lot of effort in getting the first sale, but when the customer goes to add a node, he goes to the shop that gives him best deal and the original reseller loses the sale," said Deborah D. Triant, Sitka president and chief executive. "The answer to this problem is to sell a whole network and let it grow."

The program also is an answer to Sitka's problem of trying to expand its small market share in the intensely competitive PC networking market dominated by Novell. International Data Corp. estimates Sitka's share at 2 percent. The 10Net system consists of starter packs, which include software to link two PCs, and expander packs priced at $299, which allow users to expand the network by up to five nodes. Software for subsequent node additions, at $79 per node, is sent by Sitka via phone lines.

Under terms of the program, each time a customer expands his 10Net network over the phone, Sitka will recompense the reseller who sold the expander pack 20 percent of the value of the sale. The distributor receives 5 percent. The program will continue indefinitely, Sitka said. To help generate interest among resellers, Sitka is providing three free starter packs to resellers for every expansion pack purchased.

"The strategy is to get in on those first couple of nodes of a network," said IDC analyst Chuck Barney. "If 40 percent of the customers who get a free starter pack buy the expander pack, they'll be successful." he said of the Sun unit. IDC estimates that more than 60 percent of revenues in the networking business come from network growth rather than the initial installations.