VMware Offers Partners Deal Registration, Renewal Contract Rights

The VMware Opportunity Registration program, revealed this week by VMware President Diane Greene and Executive Vice President Carl Eschenbach at VMware's Partner Day, ensures that partners get paid for influencing a deal that they nurtured but gets fulfilled by another bidder at the last minute.

The deal registration program, which went into effect over the summer, guarantees six percentage points for the "sweat equity" partners build when influencing a sale they ultimately lose to a large discount reseller or other third party, VMware executives said. A deal must be registered and valued at more than $25,000, according to the Palo Alto, Calif.-based company.

Designed to help channel partners compete with volume discounters, the program is similar to influencer initiatives introduced by Citrix Systems and other vendors.

"We've seen partners drive demand, do a proof of concept and, at the last minute, the procurement office buys it from another party. And it's not fair," Eschenbach said. "We launched a program to stop that from happening. We want to protect the people who are doing that heavy lifting for us."

VMware also opened its renewal and support program for partners to resell. Currently, the one-year contracts are sold directly by VMware, Eschenbach said. The virtualization software vendor is piloting the program in Europe and aims to offer renewal and support rights to partners globally during the first half of 2006.

The partner incentives arose from VMware's first partner advisory councils, held over the summer in the United States and Europe, Eschenbach told CRN. "Now we will allow partners to touch their customers for renewals and subscriptions. That was a big weakness," he said.

Though VMware executives didn't specify the margin that partners would receive for getting renewals signed, solution providers welcomed the incentive. Getting existing customers to sign annual renewals isn't nearly as hard as making a platform sale, they noted.

"I am excited about the tools and best practices VMware is giving us to help us build a world-class services practice, from opportunity registration and protection to the newly added ability to allow resellers to sell renewals of software maintenance," said Paul Ghostine, president of Emergent Online, Reston, Va.

Also at the conference, VMware introduced a Virtual Infrastructure Starter Kit for channel partners that bundles ESX, VirtualCenter, VMotion and other tools from the vendor in a package offered at a discount of 27 percent to 30 percent off the list price, Eschenbach said. The move reflects the company's efforts to drive more business to small and midsize companies.

VMware, Hewlett-Packard and IBM also are offering Virtual Infrastructure Nodes at discount rates. This week, for example, VMware announced a package that bundles ESX 3, VMotion, Virtual SMP and a VirtualCenter Agent for a starting price of $5,000. To help bolster its partners' services business, VMware also is developing a sales accreditation program, which it expects to launch during the first half of 2006. The company, which already offers technical training and a VMware Certified Partner program, will provide partners with more sales and training tools to help them to sell solutions for specific applications, such as disaster recovery and high availability.

Finally, the company unveiled a Capacity Planning Service that will be offered through VMware Professional Services but sold and delivered by channel partners.

Capacity Planner, which VMware acquired as part of its acquisition of AOG earlier this year, is a hosted server consolidation assessment service. Under the initiative, VMware Professional Services and VMware Authorized Consultants act as service bureaus that conduct and complete the assessment services, but any VMware partner can gather customer requirements, price and sell the deal, and deliver the results to customers.

VMware, which expects to generate $400 million in sales during its current fiscal year, drives 85 percent of its revenue through the channel. Since last year, the company has tripled its partner head count to 931, Eschenbach said. Currently, 44 are Premier partners and 115 are VMware Authorized Consulting partners, the channel chief added.

While partners applauded the Opportunity Registration program, some said the $25,000 threshold for qualifying is too expensive. That entry point would be a barrier for many partners, since customers often buy one piece at a time instead of a comprehensive infrastructure all at once, they said.

One VMware partner, who declined to be named, also noted that VMware OEM partners like IBM, HP and Dell have an unfair advantage because they get better volume discounts from VMware and can easily add support to customers' existing support contracts at no additional cost. That allows bigger partners to undercut smaller partners on products and services, the partner said.

To be competitive, VMware partners must distinguish their practices because OEMs can beat them on price, solution providers said.

"Six points on software is good, but VMware is a consulting services play," said Stuart Levinsky, president and COO of Commerx Computer Systems, an HP authorized service provider in Mississauga, Ontario, that's building a private-label VMware hosting infrastructure for telecoms and other service providers. "Dell just pumps out licenses. I get paid $15,000 to $20,000 for assessment services. When I tender the PO [purchase order], the cheapest licenses get it."