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VCE is a galaxy of questions. Channel partners want to know -- even channel partners that have had success knocking down $1 million-plus Vblock deals with VCE behind them -- whether all the time and energy spent winning Vblock business is making them more money than if they sold and integrated the individual Cisco, EMC and VMware parts -- or other vendors' wares -- and then added custom integration, management and other services on to fully aggregate solutions. In other words, can they make more with Vblock than they can doing what they do best as channel partners: integrating, aggregating, building and attaching value-added services?
"There are more opportunities available where V plus C plus E is a better solution than Vblock or VCE. That's the truth," said the CEO of a major West Coast-based solution provider and VCE partner, who requested anonymity. "I agree that there's a very strong value proposition behind all of the component parts coming together as a stack. But you may have a customer with Dell servers, for example, who doesn't want to take them out. Vblock is an effective, sweep-the-floor type of solution. But there just aren't all that many instances where that applies."
Meanwhile, Wall Street wants to know -- in the midst of its usual concerns about how Cisco and EMC will remain appealing to investors as the lumbering tech giants they've become -- is simply how often VCE is getting Cisco, VMware and EMC into opportunities those companies wouldn't otherwise have.
It's understood that EMC and Cisco make money regardless of how their wares are sold. But if the frequency of Vblock deals eclipsing customer purchases of Cisco and EMC solutions as individual pieces -- the so-called cannibalization rate -- is at all significant, then why bother with the time, energy, corporate rigmarole, channel headaches and operating expense of VCE at all?
"We just don't have enough information to know if this makes sense," Baird's Noland said. "There seem to be scenarios where a VCE-like solution works. But traditional corporate environments need flexibility; they have lots of applications and a lot of problems to solve."
Morgan Stanley's Gelblum put it thus: "How many switches did Cisco sell that would have been sold anyway but are a transfer from a direct-from-Cisco vs. VCE? How much did they really add in incremental value? That's a harder thing to tell. But really, how many customers that Cisco wouldn't have otherwise gotten into? My guess is it's very low. I have a sneaking suspicion there are not a whole lot of incremental sales here."
"You have this VCE alliance they talk about so much, and yet, if you remember, Cisco was very quick to get their server technology with NetApp," said the top sales executive at an East Coast solution provider and longtime Cisco and EMC partner. "If you talk to the Cisco guys over a drink, they'll say, 'Yeah, look at VCE but you know what, it can be a NetApp or a Citrix Xen hypervisor; we really don't care.' And then you have EMC guys saying, 'Yeah, it doesn't matter if it's Lenovo or Dell servers.' They just want it working for the customer's wants."
These are the types of questions that have dogged VCE since its inception, and that the company, despite legitimate financial, channel and customer mind-share gains over a three-year period, still can't seem to answer.
"It's going to be very interesting to see where VCE really ends up," the East Coast solution provider said. "This VCE thing is an alliance that makes sense for EMC and Cisco, or did at one point, but this is vendor lock-in. Let's call it what it is. A lot of customers see that, and they really don't like the smell of it."
"VCE is a cumbersome channel and way to go to market," the aforementioned West Coast solution provider said. "It just all seems like a very expensive marketing play."
NEXT: Confronting VCE's Channel Challenges
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