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Channel Mulls Potential Synergies, Conflicts Of EMC-VMware Marriage

Paula Rooney

Initially, VMware's largest partners--many of whom are also major IBM Business Partners--were surprised that IBM didn't acquire the Palo Alto, Calif.-based company, given the tight relationship between those two vendors.

Even as they weigh the likely impact on partners in both the enterprise and midmarket space, those partners see potential synergies between EMC and VMware's channel as the storage giant tries to make a bigger push into the small- and midsize-business space.

And the deal will give VMware and its partners the clout of an enterprise company and more feet on the streets as Microsoft prepares to enter the Intel virtual server market early next year.

However, VMware's partners say they're not so sure about that, particularly as EMC is readying its sales force to sell a series of integrated products beginning early next year.

"I can't see them chopping off the channel at its knees because the channel reaches the SMB market where EMC wants to go with its Clariion products," said Chris Pyle, president of Champions Solutions Group, Boca Raton, Fla. "But I have to wait until it plays out."

During a conference call on Monday, EMC CEO Joe Tucci acknowledged under questioning from Wall Street analysts that it is priming its sales force to push more than 20 joint solutions from EMC and VMWare into the enterprise market.

The impact of this on VMware partners, as well as IBM and Hewlett-Packard partners, remains unclear.

The first solution, which has been under development as part of a "stealth" project by the two companies for more than a year, will unify the EMC Symmetrix Remote Data Facility (SRDF) with VMware's recently introduced VMotion technology, company executives said.

"There will be solutions like SRDF [that] we'll bring together with VMotion. ... It will be one of the first products that come to market and will be pushed though our sales force," Tucci said, noting it will be brought to market shortly after the ink has dried on the acquisition. "There are at least 20 products we'll link and bring to the market through EMC's sales force. We'll add more and more [integrated] products through our sales force."

EMC executives said VMware will operate as a separate subsidiary, and the virtual server software will continue to be fulfilled though VMware's existing base of 300 reseller and service partners.

EMC had little else to say about its channel strategy during an hourlong conference call on Monday after the market closed. Company executives did not specify which--if any--of the jointly developed solutions would be authorized through VMware's partners, many of whom are IBM Business Partners and HP Partners.

Partners have not been told how the product lines will be segmented through VMware's increased sales force and channels, and whether they will be authorized to sell the integrated solutions.

VMware moves roughly 50 percent of its $100 million revenue base though its stable of 300 partners in its VIP Network.

EMC, on the other hand, has traditionally sold direct and rolled out its first multitiered channel program only last summer.

While it has been warming up to the channel as the tech downturn hit its sales hard, the Hopkinton, Mass.-based storage giant has an intimate relationship with another direct server vendor, Dell, and moves just one third of its $5.5 billion in annual revenue though all partners.

One of VMware's largest partners that also started reselling EMC's storage products last year is cautiously optimistic about the union, noting that EMC has been more channel-friendly and careful to avoid channel conflict over the past year.

However, he acknowledges that the full impact on the channel remains a big question mark.

"I don't find it to be frightening--surprising, but not frightening. EMC is not scary," said Charlie Leffingwell, sales manager at Expert Server Group, Bedford, N.H. "We have a good relationship with EMC, and they've had minimal channel conflicts. If VMware is run as a separate subsidiary, the last thing I'd expect from EMC is to muck with the channel program."

Many Wall Street analysts grilled Tucci and other EMC executives on the impact on its partnerships with IBM and HP. Both OEMs partner closely with VMware in their server businesses, but they compete against EMC in the burgeoning storage software space.

EMC insists it will remain open and will make available an open API to ISV partners and to HP and IBM--as well as their channel partners--so they can also develop integrated storage virtualization solutions of their own.

While the deal took some OEM, ISV and channel partners off guard, VMware said it will maintain its existing relationships with leading OEM partners and their business channels.

VMware CEO Diane Greene called several IBM and HP partners on Monday and told them to proceed with business as usual. "They see this as real value added with their hardware, and we do sales with a lot with their channels," said Greene, who will remain in her management role once the deal is completed in the the first quarter of next year. "I don't see that being interrupted at all."

She said, for example, VMWare will honor its interoperability agreements announced with several vendors of SANs earlier this month. The company said its ESX Server had been qualified for EMC, Fujitsu Siemens Computers, Hitachi Data Systems, HP, IBM and Network Appliance storage systems.

VMware's ESX server virtualization software is the company's flagship product and is being deployed by many companies in the enterprise and midmarket space to consolidate servers in the data center.

The company's recently introduced VMotion, which allows customers to move application workloads from one Intel server to another in uninterrupted fashion. Combining this with storage will allow customers, for the first time, to store dynamic--as well as static--application data.

The Virtual Center product, another recently launched VMware offering, allows customers to pool and provision many resources in a data center.

Many of those storage virtualization solutions will play well in the Fortune 100 accounts the two companies share, and they will fit in nicely with HP's Adaptive Infrastructure and IBM's on-demand frameworks for utility computing, EMC executives said.

HP said it will support its existing VMware customers, but it's clear the battle lines are being drawn.

One HP spokesman noted that HP is committed to virtualization in servers and storage systems and owns patents in the virtualization arena and has been doing virtualization for years.

Earlier this mont, HP made a related announcement, outlining new products and services for storage virtualization, the HP spokesman said.

"Virtualization is an important element of the HP Adaptive Enterprise strategy. As such, HP's innovation in virtualization spans single technologies like servers and storage up through the more compelling and strategic complete IT utility," said Nick van der Zweep, director of Infrastructure Solutions and Virtualization at HP, in a statement. "HP will continue to support existing customers and honor current agreements of VMware technology employed on HP product lines."

VMware's partners acknowledge that storage virtualization is an enterprise push, but they claim the solutions will also have appeal in the mid-market. And they want to participate in the push, hoping they will be authorized to sell both the new line of integrated solutions and retained to sell existing products.

EMC, like its chief competitor Veritas Software, is largely an enterprise software company looking to gain a bigger slice of the midmarket storage business.

One Microsoft solution provider, however, predicts EMC will have a tough time competing with Microsoft in the midmarket virtual server market.

According to information posted on Microsoft's own Web site, the company's Virtual Server will be available next March.

"Given that our work is done in the SMB space, we have never had any reason to use or work with anything/anyone from EMC because they only play in the larger-company space," said Michael Cocanower, president of ITSynergy, a solution provider in Phoenix. "Right out of the starting gate, they have reputation problems in the midmarket. They are an enterprise company, and there's a huge gulf between working with enterprises and working across all company sizes. I'd be surprised if EMC was successful at adjusting."

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