A Virtual Channel Opportunity

They say timing is everything except if you're in the restaurant business, then it's location, location, location. Well, VMware certainly knows a thing or two about timing. No sooner had the ink dried on the nearly $1 billion it raised from its IPO then its executives were calling our offices to disclose plans for a massive push into the small to midsize business market. Let's give VMware two stars—one for timing and the other for picking a great location—the SMB market.

ROBERT C. DEMARZO Can be reached via e-mail at rdemarzo@cmp.com.

In case you have been living under a rock, VMware makes virtualization software, the technical underpinnings of which help companies lower their IT costs by putting numerous applications on one server vs. one server per app, the way it was done when dinosaurs roamed the earth. It sounds like a technology tailored for large business, and the fact is, it has been until now. VMware is debuting at our XChange 2007 conference in Orlando, Fla., with plans to recruit thousands of partners to help sell its virtualization software to SMBs. It appears the company finally got some channel religion, based on its belief that if it's to continue growing at a rapid clip (first half revenue nearly doubled), it needs to sell to customers with 101 to 1,000 employees.

Carl Eschenbach, who heads up the company's global field operations, is responsible for VMware's effort in this space, thus, he has the job of convincing you why you should take the plunge. The company has lined up a number of distributors to help support its channel push, which is a good start. Still, VMware does face some serious challenges in this space. First and foremost, Eschenbach's team must convince potential VARs that the company is seriously committed to the channel. After all, it is owned by EMC and remains tethered to a company with a checkered channel past. But solution providers will look past that if the company's program is sound and its products can be positioned to fit into the SMB space—no easy task.

One of VMware's strongest selling points will be the services and products that accompany the sale of its virtualization solution. Service sales come in at a 4-to-1 ratio to VMware product sales and open up server and storage upgrades as well, Eschenbach claims. But that story needs some fine-tuning for midsize customers with limited IT funds who don't want to buy additional hardware or don't understand virtualization's benefits. Despite its enterprise success, VMware can't assume that the average SMB-focused VAR fully understands how virtualization can help its customers, or even the technology itself, so the company must make an investment in channel education. You hate to tell this to a company with a market cap of some $20 billion fresh off an IPO second only to Google, but that doesn't buy you much in the channel. Solution providers need to understand VMware, the company, even more than they do virtualization technology.

As a die-hard Yankees fan, i was heartbroken to hear the news about the passing of Phil Rizzuto. Hey Scooter, RIP. Read my online column on Rizzuto's connection to business and let me know what you think of VMware at rdemarzo@cmp.com.