The strategic significance of VMware's cloud infrastructure stack can't be overestimated. VMware expects VARs to use it to build private clouds -- both for their customers and within their own organizations. VMware also expects service provider partners to use its cloud stack to build public clouds. In a sense, VMware's cloud stack will be the linchpin for the hybrid cloud service delivery model that VMware believes will become the primary way most enterprises adopt cloud computing.
Aware of the channel's power in driving customer demand, VMware plans to offer incentives to partners that sell and position its cloud stack as a suite of products to their customers, said Carl Eschenbach, VMware's president of customer operations.
"We're focused on building out a private cloud suite that includes all of our products, and over time we will package it as such so that it's easier for the channel to sell," Eschenbach told CRN.
Eventually, VMware intends to give its channel an all-inclusive private cloud data center SKU, although Eschenbach said VMware needs to integrate its cloud portfolio more tightly to make this possible. "Today there isn't a single SKU that pulls it all together, but that's the direction we're going as a company," he said.
The VMware Service Provider Program includes traditional service providers like Verizon and SingTel as well as traditional channel partners. Getting these two parties working in concert is one of the biggest near-term challenges VMware faces, as many solution providers are quite comfortable with selling private cloud but are less enthused about working with service providers.
VMware has mapped out several paths partners can take, one of which involves steering customers to public cloud service providers and collecting referral fees. Understandably, many VARs aren't keen on the idea of referring customers and potentially seeing them defect to these companies.
"By asking solution providers to evolve to collecting agency fees from service providers, will this erode margins and force us to either expand and become service providers, or shrink and reduce the transactional VMware business we've built our organizations around?" asked Dan Weiss, CEO and co-founder of Varrow, a Greensboro, N.C.-based VMware partner.
In another scenario, solution providers will resell a service provider's public cloud offerings to their own customers. But it remains to be seen if this option will take root as VMware envisions. One VMware partner and VAR500 solution provider said service providers aren't interested in working with partners because they feel they can get the job done on their own.
"Service providers don't want to have partners reselling their stuff because they feel like they'll be giving away margin to partners. So it really doesn't work in execution," said the solution provider, who requested anonymity. "Bottom line is that service providers don't want to partner."
According to VMware, VARs can also move to the cloud by renting co-location space from service provider data centers, and either offer their own white-label cloud offerings or set up a cloud offering in their own data center, if they have one.
VMware is aware of the uneasiness that's percolating in its channel and is endeavoring to explain how working with service providers will actually open up more business.
"We actually see this as a very big opportunity for our traditional partners to leverage and monetize the cloud, either themselves or in partnership with the service providers," said Eschenbach. "But we're not going to make it a competitive environment. We have to bridge the gap between the traditional service providers and our solution providers."
What about partners that either don't want to make the jump or simply can't make it work business-wise? Eschenbach said these VARs will not get left behind, estimating that 80 percent to 85 percent of apps will still be running in a private data center -- the traditional bailiwick of the VMware solution provider.
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