Last year, VMware was in full-blown channel partner recruitment mode. After building a channel base of 15,000 worldwide partners, of which 4,000 are in the Americas (Canada has the second largest base of partners behind the U.S.), the company subtly introduced broad and easier to understand channel marketing messaging that would help solution providers sell more virtualization solutions to the small-to-mid-size business market.
Julie Eades, senior director of North American marketing for VMware, said in 2008 VMware started looking to consolidate Americas-based partners by making sure they have the right programs and profitability, while continuing to sign solution partners as people learn more about VMware and virtualization.
VMware has a traditional three-tier channel structure, enabling channel partners to grow from entry-level status to an enterprise area all the way to its top tier, called premier.
“We still have a lot of partners signing-up and what is really interesting is that they run the gamut in server and storage channel partners, with some being in (server consolidation) for a long time,” Eades said.
Some of the new sign-ons for VMware are security-focused and networking solution providers, Eades added.
One of the new channel developments from VMware is to increase the number of vendor partners that have added VMware onto their go to market channel programs. Called the Alliance Affiliate Initiative, vendor partners such as Network Appliance, EMC, CA, Riverbed, and McAfee have added incentives to their partner programs to use VMware with their own products in an attempt to increase solution provider opportunity and profitability.
“Those who partner with a CA or a McAfee and look at the programs will see the validity (with virtualization) and they might be able to increase their business by working with us,” she said.
Eades believes that companies such as Network Appliance and EMC see VMware as a way to enhance the sales opportunities and attain stronger loyalty with partners. It also improves services revenue.One of the key elements to the Alliance Affiliate Initiative is training, and VMware has updated its partner portal to provide the right information for these affiliate channel partners and more expansion of this program is anticipated, Eades said.
However, the lucrative SMB is where most of the channel resources are heading for the company, especially in the area of desktop consolidation, where VMware is providing channel partners with more training and marketing materials.
Desktop virtualization has also enabled VARs to have another conversation with existing customers that have already gone through a server consolidation project or a disaster recovery through VMware’s Site Recovery Manager product.
“A large percentage of our business is in SMB and what we started to do was make the message a little easier to understand for the SMB,” Eades said. “Some partners that sold into the enterprise and the data centre might not have realized what the opportunity was in the SMB space.”
With that, VMware’s channel team conducted training and Web casts and provided marketing materials to help partners get the message of virtualization in the SMB. Further to this, VMware changed its packaging with its Acceleration Kits and lowered the entry-point in its deal registration program, called Advantage Plus, to encourage partners to sell down in the SMB.The company also lowered its entry-level price to under $3,000 to try to make it more profitable for partners who sell in the SMB, she added.
Eades admitted that there has been much speculation in the market to entry-point for virtualization, but she has seen VARs work out solutions for five to 10 servers. “It depends more on the business because it may not be related to the amount of employees you have. It depends on the business and we do not say below a certain number it is not worth it,” she said.
It didn’t take long for new CEO Paul Maritz to put his stamp on VMware. During an earnings conference call, Maritz, the former Microsoft executive who replaced VMware founder Diane Greene, said the vendor’s ESX virtualization software will be available free of charge.
Free virtualization
It didn’t take long for new CEO Paul Maritz to put his stamp on VMware. During an earnings conference call, Maritz, the former Microsoft executive who replaced VMware founder Diane Greene, said the vendor’s ESX virtualization software will be available free of charge.
The reason Maritz gave for the move was that the vast bulk of VMware revenues come from its virtualization infrastructure software, and that income would support the free product. Also, ESX has a small footprint and can easily be deployed, enabling more people to benefit from the technology.
“The more out there the better it is for us, as it creates new sockets to sell our virtualization infrastructure,” Maritz said. This move, however, follows Microsoft’s release of Hyper-V and its own aggressive pricing, where Windows Server 2008 with Hyper-V starts at $999.
Bob Kelly, corporate vice-president, server and tools group at Microsoft, said during the that Microsoft’s virtualization solution was a third of the price of VMware. “We are on the front foot. We are no longer on the back foot. We’re telling our story. We had a great launch. We have the most comprehensive view left to right in the industry, management of physical and virtual; oh and by the way, a third of the price of VMware,” Kelly said.
Tom Bittman, vice-president and distinguished analyst with Gartner, said VMware’s move is indeed significant. It will allow VMware to compete more effectively with Microsoft, which is bundling its Hyper-V virtualization software with high-end editions of Windows Server. “This takes the price argument away,” Bittman said.
Most companies now are buying other VMware products along with the hypervisor, which is why the company can afford to give it away, he said. VMware should have made ESXi free from the start, he added. “That was a mistake, and they are correcting it now,” he said. ESXi is currently priced at US$495.
“It makes sense for us to seed the market with a free product and expose a broader set of customers to VMware, being confident that they will take the next step and upgrade to our Virtual Infrastructure product,” Balkansky said.
VMware is facing some of its toughest competition yet as Microsoft and other companies seek to commoditize the core virtualization technology on which VMware’s business was built by offering it as part of the OS.
Maritz added that he intends to take VMware beyond the hypervisor to become an enabler of virtualization infrastructure. “This is what the customers are paying us for anyways,” he said.
Currently, VMware has 20 products in its suite of virtualization solutions. “The suite is in version three and we’ve added disaster recovery, which has become popular. The fourth generation is in development for next year and it will deal with another headache, desktop management, and we’ll continue to build on that foundation,” Maritz said.
VMware has also seen growth in its channel business, with more than 48 per cent of sales being deals of $50,000 or less.
Maritz added the company will continue to extend the virtual infrastructure to more users by lowering pricings on several SKUs that will target the SMB.
“We want to bring enterprise value to smaller companies and work with partners who target the enterprise with the intent to strengthen those and help them reach the SMB,” he said.