VMware Gives Partners Financial Incentive To Go From Virtualization To Cloud

VMware is on the road from virtualization to the cloud, and it is offering partners the financial benefits it hopes will make them want to join the journey.

That's the word from Dan Smoot, senior vice president of global customer operations at VMware, who on Tuesday used his opening keynote address at the VMware Partner Exchange conference to thank partners for taking the lead in bringing in 85 percent of the company's total revenue.

"We appreciate everything you do to help grow our business," Smoot said.

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Smoot told partners they need to make sure they are moving toward being a cloud services provider to partners in order to make sure they continue to own customer workloads even as those workloads rapidly evolve towards cloud solutions.

While most VMware partners have already been involved in virtualization via the company's vSphere technology, Smoot said the next step is to adopt the company's new vSphere with Operations Management (vSOM) technology to prepare customers for the cloud.

On top of that, Smoot said end-user computing, or virtual desktop infrastructure (VDI), is an important tool for partners to help their customers get their IT infrastructures ready as customers' use of mobile and other non-traditional desktop PC devices evolve.

The next step, Smoot said, is vCloud, which is VMware's technology for developing software-defined data centers in which all the compute, storage, networking and security resources are completely virtualized and are ready to be the foundation for building hybrid clouds. "This is not vaporware," he said. "This is real. It's a real solution."

Partners need to make the necessary investments to start moving up the cloud ladder before it gets too late, Smoot said.

"We need to own the [customers'] corporate workloads," he said. "Your competitors are trying to win them. ... If we lose those corporate workloads, it's hard to get them back."

Moving up the cloud ladder is also the best way for partners to increase their own profitability, Smoot said.

NEXT: VMware Investing In The Channel

VMware's Smoot said that a partner selling vSphere might see a profit of $488 per license, with a margin of about 10 percent. However, when vSphere with Operations Management (vSOM) is added, the per-license profit increases to $3,153, with a partner margin of 51 percent. And when the customer moves to vCloud Suite, the profit per license hits $8,851, with a margin of 45 percent.

After seeing the possibilities, Smoot asked, "Does anyone want to sell a naked vSphere Suite anymore?"

Smoot also told solution provider attendees that VMware has invested heavily in its channel partners. The company in fiscal year 2012 invested about $433 million in the channel, including returning channel partners $49 million in discounts from existing account sales and $42 million in new customer account sales discounts.

"We need to invest more to make this better," he said.

Smoot called out a couple of channel partners in particular as examples of how their business grew due to VMware's channel investments, including Crofton, Md.-based Force 3, which grew its VMware business by 161 percent last year thanks to getting its VMware competencies; and Greensboro, N.C.-based Varrow, which enjoyed a 100-percent business growth thanks to its end-user solutions.